By Daniel Kruger 

U.S. government bond prices fell, snapping an eight-session streak of gains and erasing an advance from earlier in the day, as risks confronting financial markets remain unresolved.

The yield on the benchmark 10-year Treasury yield rose to 2.856% from 2.851% Friday. The yield has fallen in 16 of the past 19 sessions after having reached a seven-year high of 3.232% a month ago.

Yields, which rise as bond prices fall, increased modestly as concerns about trade tensions and geopolitical turmoil continue to dominate investor thinking. Those tensions were inflamed anew last week by the arrest of a senior executive at Huawei Technologies who was taken into custody in Canada. China on Sunday summoned the U.S. ambassador to China, Terry Branstad, to demand the U.S. retract its arrest warrant.

Yields fell earlier after British Prime Minister Theresa May delayed a critical parliamentary vote on her Brexit bill, throwing both her government and her plans for the U.K.'s EU exit into disarray. That move intensified after Qualcomm Inc. said Monday that a Chinese court had ordered Apple Inc. to stop selling older iPhone models in the country after finding the tech giant infringed on two of Qualcomm's patents.

The uncertainty about how long it will take to resolve these issues, as well as about the details of any potential solutions, have contributed to recent volatility in the stock market and the strength of the U.S. dollar, tightening financial conditions. That more restrictive environment could produce a drag on growth, slowing the U.S. expansion by as much as one percentage point next year, according to Goldman Sachs Group.

While investors continue to expect that the Federal Reserve will raise rates in December, they are increasingly unsure of what happens after that. Goldman Sachs now sees the chances of a rate increase in March at less than 50%. Fed-funds futures, which investors use to bet on the direction of central bank policy, are even more pessimistic. Late Monday they placed the probability that the Fed raises rates two times or more by the end of March at 20%, down from 54% a month ago.

The erosion of expectations "has been unusually fast," said Gautam Khanna, a bond manager with Insight Investment. Given the consensus that the Fed still intends to raise rates when officials meet next week, "if they don't, it would be a bad sign," he said.

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

(END) Dow Jones Newswires

December 10, 2018 17:14 ET (22:14 GMT)

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