After ending the previous session roughly flat, treasuries showed a notable move to the downside during trading on Tuesday.
Bond moved lower early in the session and slid more firmly into negative territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.7 basis points to 3.048 percent.
With the significant decrease on the day, the ten-year yield ended the session at its highest closing level in nearly four months.
The weakness among treasuries came as the rates of tariffs the U.S. will impose on Chinese goods and the retaliatory tariffs China will impose on U.S. goods were not as high as feared.
President Donald Trump announced new tariffs on approximately $200 billion worth of Chinese imports on Monday, although the tariffs will initially be set at 10 percent compared to the 25 percent previously floated by the administration.
However, the tariffs are set to rise to 25 percent on January 1st, and Trump said the U.S. would impose tariffs on another $267 billion worth of Chinese imports if China takes retaliatory action.
Despite the threat from Trump, China announced it will retaliate by imposing tariffs on $60 billion worth of U.S. goods, effective September 24th.
The Chinese tariffs will reportedly range from 5 percent to 10 percent after China previously earmarked some goods for a 20 percent levy.
With the new round of tariffs, Timme Spakman, economist at ING, noted the percentage of world trade affected by U.S. tariffs on China will rise to 2.5 percent.
“If the U.S. carries out its threat to impose tariffs on the remainder of its imports from China, this will equal approximately 4% of world trade,” Spakman said.
He added, “Although this percentage may seem small, the tariffs will disrupt Sino-American supply chains, and may, therefore, triple the effects on world trade.”
In U.S. economic news, the National Association of Home Builders released a report showing homebuilder confidence has held steady in the month of September.
The report said the NAHB/Wells Fargo Housing Market Index came in at 67 in September, unchanged from August. Economists had expected the index to edge down to 66.
Trading on Wednesday may be impacted by reaction to the Commerce Department’s report on new residential construction in the month of August.