05.06.201821:32:00UTC+00U.S. Yields Fall as Italian Jitters Offset Solid U.S. Data

U.S. government bonds edged up on Tuesday, driving down yields and helping to ease a bond-market selloff observed at the beginning of the week, as solid economic data were countered by concerns over the newly established Italian government's policy agenda.

The 10-year Treasury note yield fell 2.2 basis points to 2.917 percent. The two-year note yield edged down 1.8 basis points to 2.492 percent. Meanwhile, the 30-year bond yield was down a single basis point to 3.073 percent.

The 10-year German government yield edged down 5.0 basis points to 0.36 percent, according to Tradeweb data.

Treasuries came after the rally in German bonds after Italian Prime Minister Giuseppe Conte outlined large spending plans in his first speech in the key position, but did not disclose how the widening of the fiscal budget would be funded. Later in the day, the 5 Star Movement and the League won a confidence vote in the Italian Senate.

U.S. government bonds and German bonds move in sync as they are both perceived as safe-haven assets.

Investors have been reactive to the new Italian government's policy agenda. While the coalition have tempered their eurosceptic rhetoric, they deficit-widening inclinations have put them into a collision course with Brussels and bond holders who view Italy's debt burden as already excessive.

The 10-year Italian government bond yield surged 22.4 basis points to 2.775 percent.

The geopolitical concerns eclipsed the solid economic data indicating the U.S. was at risk of overheating. The Institute for Supply Management reported its non manufacturing index advanced to 58.6 percent, surpassing the average estimate of 58 percent.