Treasury securities initially experienced a robust upswing in early trading on Monday, although gains diminished as the session progressed. Although bond prices retreated from their initial peaks, they managed to retain positive levels. Consequently, the yield on the ten-year benchmark note, which inversely correlates with its price, fell by 2.6 basis points to settle at 4.543 percent, after reaching a low of 4.462 percent earlier.
The strong start for Treasuries was largely due to their status as a safe haven following President Donald Trump's formal imposition of tariffs: 25 percent on imports from Canada and Mexico, and 10 percent on those from China. According to the White House, these actions are part of Trump's "bold" strategy to hold these countries accountable for commitments on curbing illegal immigration and preventing the influx of harmful substances like fentanyl into the United States.
President Trump further signaled a potential escalation with threats of additional tariffs aimed at the United Kingdom and the European Union.
Nevertheless, the appetite for buying cooled after Trump announced an agreement with Mexican President Claudia Sheinbaum to delay Mexico's tariff imposition by one month. This decision followed Sheinbaum's commitment to immediately bolster Mexico's northern border with 10,000 National Guard troops to halt drug trafficking, especially fentanyl, into the U.S.
The safe haven appeal of bonds might also have been tempered by an Institute for Supply Management report, which indicated that U.S. manufacturing activity expanded in January for the first time after 26 straight months of contraction. The ISM's manufacturing PMI climbed to 50.9 in January from 49.2 in December, surpassing economists' forecasts of a modest rise to 49.8, with readings above 50 signifying growth.
Looking ahead, Tuesday's trading might be influenced by reactions to upcoming U.S. economic data releases, which will include reports on job openings and factory orders.
