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U.S Government Bonds Fall as Risk Sentiment Improves

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05/16/2019 | 11:56am EDT

By Daniel Kruger

U.S. government-bond prices fell after strong housing and labor data boosted investor sentiment about the economy.

The yield on the benchmark 10-year Treasury note rose to a recent 2.405%, according to Tradeweb, from 2.380% Wednesday.

Yields, which rise when bond prices fall, climbed after data showed that showed housing starts increased in April, aided by this year's falling borrowing costs.

Single-family home construction, often referred to as housing starts, rose 5.7% in April from the prior month to a seasonally adjusted annual rate of 1.235 million, the Commerce Department said Thursday. Economists surveyed by The Wall Street Journal had predicted 5.4% growth.

The climb also came after data showed initial jobless claims slipped more than expected, holding near their lowest levels since 1969. Claims, which are a proxy for layoffs in the economy, fell to a seasonally adjusted 212,000 in the week ended May 11, the Labor Department said Thursday. Economists surveyed by The Wall Street Journal had expected 220,000 new claims last week. The four-week moving average of claims, a steadier measure, rose to 225,000.

The data helped lift yields, though they remained near their lows for the year, reached as simmering trade tensions between the U.S. and China have contributed to episodes of volatility and led investors to seek the safety of government debt.

"The modest change in risk sentiment is pushing yields upward," said Alex Li, head of U.S. rates strategy at Crédit Agricole.

Investors expect that the U.S. and China will make progress at meetings later this month, Mr. Li said.

Treasury Secretary Steven Mnuchin on Wednesday said American officials are likely to travel to Beijing soon for negotiations. Mr. Mnuchin told a Senate committee that the U.S. team is "likely to go to Beijing at some point in the near future."

There is less clarity about talks from the Chinese side. Chinese Commerce Ministry spokesman Gao Feng said Thursday that "the Chinese side doesn't have a grasp on the U.S. side's plans to come to China for negotiations." Mr. Gao then said the U.S.'s escalation of tariffs "severely hampered" consultations.

Write to Daniel Kruger at Daniel.Kruger@wsj.com

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