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U.S. Government Bonds Fall on Chinese Data -- Update

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04/12/2019 | 03:59pm EDT

By Sam Goldfarb

U.S. government-bond prices fell Friday after better-than-expected Chinese economic data helped reduce demand for safer assets.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.560%, compared with 2.502% on Thursday.

Yields, which move in the opposite direction of prices, climbed overnight after new data showed Chinese banks increased lending in March while Chinese exports rose after declining in February.

Chinese banks issued 1.69 trillion yuan ($251.5 billion) of new yuan loans last month, according to data released Friday by the People's Bank of China. That was up sharply from CNY885.8 billion in February and above the CNY1.25 trillion forecast by economists surveyed by The Wall Street Journal.

Investors pay close attention to China because it plays such a large role in economic growth around the world.

"Today is obviously a risk-on day," said Daniel Mulholland, head of U.S. Treasury trading at Crédit Agricole. Chinese data, he added, "was the initial catalyst," as it helped ease recent concerns about the global growth outlook.

Before Friday, Treasurys had fluctuated this week as investors reacted to the latest U.S. economic data. The yield on the 10-year note dropped to 2.479% on Wednesday after data showed a gauge of consumer prices rose less than 2% in March from a year earlier, extending a trend of muted inflation.

Yields then climbed Thursday after the Labor Department said initial jobless claims, a proxy for layoffs across the U.S., dropped by 8,000 to a seasonally adjusted 196,000 in the week ended April 6. That was the lowest since 1969, when the labor market and population were much smaller.

In general, positive economic data depresses demand for Treasurys because it leads investors to favor riskier assets such as stocks. Accelerating inflation, which can come with faster economic growth, is one of the biggest threats to long-term bonds because it erodes the purchasing power of their fixed payments.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

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