TREASURIES-US yields extend fall after Trump remarks on China

(Recasts, adds Trump statement, updates yields throughout) WASHINGTON, Oct 10 (Reuters) – Benchmark U.S. yields were sharply lower late Friday morning, extending losses from earlier in the session after President Donald Trump threatened a "massive" increase in tariffs on imports from China. The president's lengthy statement on Truth Social pushed rates out of their recent range-bound pattern, with the 10-year Treasury yield hitting its lowest level since mid-September. The sharper decline in Treasury yields mirrored a dip seen in stocks, often a sign investors are seeking a safe haven. U.S. sovereign debt had been in a holding pattern in recent days as a government shutdown, now in its tenth day , halted the production of crucial economic indicators. "It’s fuel on the fire. For a while it looked like things were going well between Trump and Xi, but China’s latest export controls on rare earth minerals set Trump off," said Brian Jacobsen, chief economist at Annex Wealth Management. "A lot can happen between now and the APEC summit where they were supposed to meet, so it wouldn’t be surprising to see tempers cool before then." Earlier, Federal Reserve Governor Christopher Waller had told CNBC the central bank could make "cautious" moves to lower benchmark lending rates, helping comfort investor expectations that the central bank would not be driven to excessive rate cutting by changes in staffing and a weakening labor market. The yield on the benchmark U.S. 10-year Treasury note fell 8.9 basis points to 4.057%, its lowest since September 18. The yield on the 30-year bond fell 8.2 basis points to 4.651%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 53.7 basis points. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, fell 7.7 basis points to 3.522%. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.387% after closing at 2.425% on October 9. The 10-year TIPS breakeven rate was last at 2.33%, indicating the market sees inflation averaging about 2.3% a year for the next decade. (Reporting by Douglas Gillison in Washington and Chuck Mikolajczak in New York; Editing by Nia Williams and Toby Chopra)

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