- US Treasury yields fell Tuesday as investors waited for US House Speaker Nancy Pelosi to land in Taiwan.
- The 10-year yield hit a fresh four-month low before Pelosi's plane touched down on the island nation.
- China, which considers Taiwan its territory, has threatened a military response to Pelosi's visit.
Investors snapped up US government debt on Tuesday, sending yields lower, as they awaited the arrival of House Speaker Nancy Pelosi in Taiwan, a potential visit that prompted China to threaten a military response.
Yields pulled back across the Treasury curve, with the closely watched 10-year yield touching a fresh fourth-month low of 2.524% as it veered toward a fifth consecutive decline. The 30-year bond yield pulled back by 56 basis points to 2.869%,
Pelosi's flight from Malaysia was expected to land late Tuesday night in Taiwan, or during morning market trading in the US. Her visit would make Pelosi the highest-ranking US official to visit the island in 25 years. The 2-year note yield fell 13 basis to 2.855% after dropping by as much as 61 basis points to 2.807%.
Pelosi's visit to Taiwan holds the potential of flaring tensions between the US and China as the latter sees the island as part of its territory. The US Navy deployed four US warships east of Taiwan as Pelosi headed to the island, Reuters reported on Tuesday. The Navy called the deployments routine but noted that warships are "able to respond to any eventuality," the report said.
Reuters also reported Tuesday that Chinese planes flew near the median line dividing the Taiwan Strait and that several Chinese warships remained close to the unofficial dividing line since Monday.
Signs of risk aversion cropped up in the US stock market Tuesday, with the S&P 500 moving lower. Meanwhile, haven asset gold gained modestly, up 0.3% at $1,793.80.
The Taiwan dollar on Tuesday extended losses against the US dollar, two days after it fell to its lowest point since June 2020. The Southeast Asian island's currency was below the key threshold of 30 per US dollar ahead of Pelosi's visit.
China on Monday reiterated a warning of a possible military response if Pelosi were to visit Taiwan during her tour of Asia this week.
"We would like to warn the US again that China is standing by, and the Chinese People's Liberation Army will never sit idly by and will take resolute and strong countermeasures to defend its sovereignty and territorial integrity," Chinese Foreign Ministry spokesman Zhao Lijian told reporters.
The White House on Monday pushed back on China's theat.
"Put simply, there is no reason for Beijing to turn a potential visit consistent with long-standing U.S. policy into some sort of crisis or use it as a pretext to increase aggressive military activity in or around the Taiwan Strait," said National Security Council spokesman John Kirby, according to NBC News.
Newt Gingrich was serving as House Speaker in 1987 when he visited Taiwan. Gingrich told Fox News this week the West would "respond massively" if China struck against Pelosi during her visit.