By Mark DeCambre, MarketWatch

Treasury yields were little changed in Friday trade, but were mostly lower for the week, after a swoon for global stocks on nagging worries about escalating trade tensions between China and the U.S.

How are Treasurys performing?

The yield on the 10-year Treasury note fell 0.5 basis point to 2.826%, extending a 2.2 basis-point decline this week, only a day after the benchmark security logged its largest single-session drop since Sept. 5, according to WSJ Market Data Group.

The 30-year Treasury bond yield was up by 0.8 basis point to 3.074%, trimming its weeklong decline to 0.7 basis point.

The 2-year note yield, the most sensitive to shifting expectations for Fed policy, shed 2.5 basis points to 2.262%, contributing to a 3.3 basis point weeklong drop. Earlier this week, the short-dated yield hit its highest since September 2008.

The yield curve as measured by the spread between the 2-year note and the 10-year, a differential bond traders view as a gauge of the economic outlook, was at 56.4 basis points, holding around the narrowest since late January.

Bond prices move in the opposite direction of yields.

Need to know: 'I don't think this is a trade war,' says veteran Wall Street strategist (http://www.marketwatch.com/story/i-dont-think-this-is-a-trade-war-says-veteran-wall-street-strategist-2018-03-23)

What are driving markets?

Investors are focused on the potential for a global trade war erupting, as China threatens to retaliate against the Trump administration's tariffs on up to $60 billion worth of goods. China's commerce ministry on Friday said it would impose tariffs on $3 billion in U.S. goods. Beijing officials have charged that the U.S.'s duties violate world trade pacts.

Concerns about trade conflicts sent investors running for the perceived safety of havens like government bonds, gold and the yen , with the Japanese currency touching its highest level against the buck since late 2016. Major stock indexes, on the other hand, have come under pressure , with the S&P 500 down for the year after a record-busting run in 2017.

See: Here's why stock-market investors are fixating on the threat of a trade war (http://www.marketwatch.com/story/heres-why-the-stock-market-took-the-china-tariffs-so-hard-2018-03-22)

Fears of an outright trade conflict has pushed the Federal Reserve into the background. The central bank decided on Wednesday to raise interest rates a quarter-point and communicate its intention to normalize policy at a slightly faster clip than anticipated in coming years. The dot plot, an aggregate of Fed official's projections for future interest rates, signals three for 2018, but a slight faster pace for 2019 and 2020.

However, Fed Chairman Jerome Powell played down changes to the dot plot, highlighting the uncertainty in forecasting interest rates.

Separately, turnover in the White House also has drawn some focus after President Trump named John Bolton his new national security adviser, succeeding Lt. Gen. H.R. McMaster (http://www.marketwatch.com/story/john-bolton-to-replace-hr-mcmaster-as-trumps-national-security-adviser-2018-03-22-191033536).

The personnel change comes after Trump replaced Secretary of State Rex Tillerson with Central Intelligence Director Mike Pompeo (http://www.marketwatch.com/story/tillerson-out-as-secretary-of-state-as-trump-taps-cia-chief-pompeo-2018-03-13).

Moreover, Bolton is viewed as a controversial figure related to his tough stances on Iran and North Korea, which could be a source of market unease.

What are strategists saying?

"Movement in Treasury market rates was erratic and tended to mirror movement in the equity market. The financial markets had much to digest, including troubling online data abuses, rate hikes, rising Dots, more heavy-handed tariff announcements, more budget drama," said Ward McCarthy, chief financial economist at Jefferies.

"President Trump imposed $60 billion worth of tariffs on China on Thursday; Stock markets tanked on the news, with the S&P 500 sliding 2.5% on the day. China retaliated by unveiling $3 billion worth of tariffs on US imports to China. It is interesting to note that China holds $1 trillion in US Treasurys," wrote Robert Yawger, director at Mizuho Securities USA

What data and Fed speaker are ahead

Durable-goods orders for February (http://www.marketwatch.com/story/durable-goods-orders-snap-back-with-31-gain-as-business-investment-surges-2018-03-23)came in at 3.1%, above the 1.8% forecast from economists surveyed by MarketWatch.

Minneapolis Fed President Neel Kashkari said he backed the rate hike this week but said the economy had yet to reach full employment and would only support tightening if there was a pick up in wage growth, Reuters reported (https://www.reuters.com/article/usa-fed-kashkari/dovish-kashkari-backed-fed-rate-hike-upgraded-policy-path-a-bit-idUSN9N1GG02D). Boston Fed President Eric Rosengren will give a speech at the Fed's international research forum at 7 p.m.

What other assets are in focus?

Stocks posted sharp weekly declines, with the Dow Jones Industrial Average, Nasdaq Composite and the S&P 500 index closing more than 5% for the week (http://www.marketwatch.com/story/dow-set-for-triple-digit-drop-as-trade-war-fears-trigger-global-rout-2018-03-23).

Meanwhile, the German 10-year bond yield edged higher to 0.527% from 0.526% on Thursday. Known as bunds, the German bond is often viewed as a proxy for the health of the eurozone.

(END) Dow Jones Newswires

March 23, 2018 16:32 ET (20:32 GMT)

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