By Daniel Kruger 

U.S. government bond prices surged Friday, at the close of a week in which investors became increasingly focused on risks proliferating throughout the economy.

The yield on the benchmark 10-year Treasury note fell to 2.938%, according to Tradeweb, from 2.981% Thursday. Yields fall when bond prices rise.

Yields fell after the Commerce Department said Friday that orders for durable goods -- products designed to last at least three years, such as computers and machinery -- declined 1.7% from the prior month to a seasonally adjusted $248.5 billion in April.

Focus among many investors and analysts has shifted to the balance of risks facing the economy, which has become less favorable this week. President Donald Trump is pushing to impose new tariffs on auto imports, which could lead to slower growth by inviting retaliatory measures from Germany, Japan and South Korea. The U.S. Commerce Department launched a probe Wednesday into whether it could raise tariffs to up to 25% on auto imports on the basis of national security.

Other measures of U.S. manufacturing are sending signals of moderating growth. U.S. factory activity grew more slowly in April compared with earlier in the year, the Institute for Supply Management said this month. The trade group attributed the deceleration in part to uncertainty surrounding U.S. trade policy. The Federal Reserve's measure of manufacturing output advanced solidly in April, but after soft readings in three of the prior four months.

Demand for Treasurys has been bolstered by investors seeking to reduce risk in their portfolios after Mr. Trump's decision to cancel his planned summit with Kim Jong Un. The move has shifted the U.S. approach to North Korea away from a monthslong rapprochement and back to a campaign of military and economic pressure.

The gap between U.S. government bond yields and those in Italy, Spain, Portugal and Greece has widened as investors become increasingly concerned about growing risks in the European economy. Slowing growth and the rise of antiestablishment political parties in countries including Italy has raised questions about how soon growth can get back on track.

"We've got political uncertainty in Europe, we've got geopolitical concerns the Trump calling off his date with Kim Jong Un," said Ian Lyngen, head of U.S. government bond strategy at BMO Capital Markets. "The potential for international trade to be hurt by the administration's tariff tantrums is real."

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

(END) Dow Jones Newswires

May 25, 2018 12:08 ET (16:08 GMT)

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