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Treasuries See Further Upside Amid Threat Of More Tariffs

Treasuries moved sharply higher during trading on Friday, extending the strong upward move seen over the past several sessions.

Bond prices jumped at the start of trading and saw some further upside as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 8.5 basis points to 2.142 percent.

With the steep drop on the day, the ten-year yield once again slumped to its lowest closing level since September of 2017.

Treasuries continued to benefit from their appeal as a safe haven after President Donald Trump revealed plans to use tariffs to compel Mexico to make efforts to stop the flow of illegal immigrants across the country and into the U.S.

"On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP," Trump announced in a post on Twitter

He added, "The Tariff will gradually increase until the Illegal Immigration problem is remedied, at which time the Tariffs will be removed."

Trump revealed in a subsequent White House statement the tariffs will be raised to 10 percent on July 1st if the crisis persists, with tariffs eventually rising as high as 25 percent by October 1st.

The president argued the sustained imposition of tariffs will produce a massive return of jobs back to U.S., describing the move as an effort to "firmly and forcefully" stand up for America's interests.

"We have confidence that Mexico can and will act swiftly to help the United States stop this long-term, dangerous, and deeply unfair problem," Trump said.

"The United States has been very good to Mexico for many years," he added. "We are now asking that Mexico immediately do its fair share to stop the use of its territory as a conduit for illegal immigration into our country."

The threat of new tariffs on Mexican imports comes amid the escalating trade dispute between the U.S. and China, which has recently weighed on stocks and raised concerns about the global economic outlook.

Reflecting the collapse of U.S.-China trade talks, the University of Michigan released a report showing a bigger than expected downward revision to its reading on U.S. consumer sentiment in the month of May.

The report said the consumer sentiment index for May was downwardly revised to 100.0 from the preliminary reading of 120.4.

The index remains notably higher than the final April reading of 97.2 but came in below economists for a reading of 101.5.

Any developments on the trade front are likely to once again take the spotlight next week, potentially overshadowing some key economic data.

The monthly jobs data due next Friday may be the one economic report that can break through the noise generated by Trump's seemingly ever-escalating trade conflicts.

Reports on manufacturing and service sector activity, construction spending, factory orders, and the U.S. trade deficit could also attract attention if there are no developments on the trade front.

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