By Daniel Kruger 

U.S. government bonds rose on Monday as investors remain concerned about geopolitical turmoil over trade and escalating tensions with Turkey.

The yield on the benchmark 10-year Treasury note fell to its lowest since May 29, 2.823%, from 2.873% Friday. Yields fall as bond prices rise.

Yields fell Monday as U.S. officials rejected an effort by Turkey to tie the release of a U.S. pastor with relief for a major Turkish bank facing billions of dollars in U.S. fines, telling Ankara other issues are off the table until the minister is freed, a senior White House official said.

With no new U.S. economic indicators, many analysts also turned toward data on investor positioning. Speculative investors have placed a record number of bets that 10-year Treasury future prices will decline, according to a Commodity Futures Trading Commission report. Concerns about the bets grew after Jeffrey Gundlach of DoubleLine Funds said Monday on Twitter that there is the potential for a "squeeze," which could drive bond prices higher.

In a short squeeze, the price of a security rises, forcing investors who have short positions that benefit from the drop in that asset's price, to buy more to close out their bets on declining prices. As more investors do this, it creates additional demand for the security, driving its price up further.

"You have to be concerned about what's going on overseas," said Thomas Roth, managing director in the rates trading group at MUFG Securities Americas Inc. With the potential for trade and political tensions to flare amid thin trading, where markets can move quickly on little news, "the market is vulnerable to some sort of squeeze," he said.

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

(END) Dow Jones Newswires

August 20, 2018 16:53 ET (20:53 GMT)

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