By Sunny Oh

Prices for U.S. government bonds rose on Monday, pushing yields lower, after the Treasury Department as U.S.-China trade tensions further heightened.

What are Treasurys doing?

The 10-year Treasury note yield slipped 2.7 basis point to 2.875%, the lowest since May 31. The 2-year note yield ticked lower by 2.1 basis points to 2.529%, while the 30-year bond yield fell by 2.1 basis points to 3.024%, the lowest since May 31.

Bond prices move in the opposite direction of yields.

What's driving the market?

The Treasury Department is drafting limits on Chinese investment into U.S. companies with "industrially significant technology," a government official with knowledge of the matter said on Sunday (http://www.marketwatch.com/story/trump-seeks-curbs-on-chinese-investment-in-us-tech-firms-exports-to-china-2018-06-24). Plus, the National Security Council and the Commerce Department are coming up with export controls to prevent important technologies from being sent to China. The plans are expected to be announced by the end of next week.

The curbs come on top of the tariffs that President Donald Trump imposed on $50 billion of Chinese imports. Trump also threatened an additional levy on $400 billion of imports if Beijing attempted to retaliate. Beijing has threatened to match the tariffs.

See: Trump's latest threat to U.S. trade partners: Drop tariffs or face consequences (http://www.marketwatch.com/story/trumps-latest-threat-to-us-trade-partners-drop-tariffs-or-face-consequences-2018-06-24)

Read: Trade-war tracker: Here are the new levies, imposed and threatened (http://www.marketwatch.com/story/trade-war-tracker-here-are-the-new-levies-imposed-and-threatened-2018-06-22)

With a return of trade tensions kicking off the week, investors bought haven assets like U.S. government paper as they fled from stocks (http://www.marketwatch.com/story/dow-futures-drop-more-than-150-points-as-trump-makes-more-trade-threats-2018-06-25). The S&P and Dow are down more than 1%. The once-highflying Nasdaq saw the sharpest fall among the benchmark indexes, shedding more than 2% of its value.

Investors will also handle a wave of bond auctions from the Treasury, with around $100 billion of coupon-bearing debt set to go on the block between Tuesday and Thursday. So far, market participants have taken down the increase in bond auction sizes with little impact on trading.

What did market participants say?

"Treasury bonds in another flight-to-safety bid today as equities give back all their gains from June. Trade tariff anxiety continues to grow as the Trump administration institutes new measures on Chinese investment in the U.S. citing security concerns," said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.

"Many market participants are worried that ongoing trade war will ignite a global recession. They believe the trade war concern could eliminate one of the future Fed rate hikes possibly the one targeted for December," said di Galoma.

What's on investors' radar?

The Chicago Fed's National Activity Index slumped to -0.15 in May from 0.42 in April (http://www.marketwatch.com/story/chicago-feds-may-national-economic-index-retreats-into-negative-as-factories-slowed-2018-06-25). On the other hand, May's new home sales figures hit an annual pace of 689,000 (http://www.marketwatch.com/story/new-home-sales-rebound-in-may-2018-06-25), well above the 668,000 forecast from economists surveyed by MarketWatch.

(END) Dow Jones Newswires

June 25, 2018 15:35 ET (19:35 GMT)