Yields on U.S. government debt finished lower on Friday and were little changed for the week, as traders absorbed President Donald Trump’s views on interest rates and China.

What happened

• The yield on the 2-year Treasury BX:TMUBMUSD02Y fell 1.3 basis points to 4.271%, from 4.284% on Thursday. Friday’s closing level was the lowest since Jan. 16. It finished the week marginally lower.
• The yield on the 10-year Treasury BX:TMUBMUSD10Y dropped 1.2 basis points to 4.624%, from 4.636% on Thursday. For the week, it finished up by 1.4 basis points.
• The yield on the 30-year Treasury BX:TMUBMUSD30Y fell 1.9 basis points to 4.849%, from 4.868% on Thursday. For the week, it finished only marginally higher.

What drove markets

The policy-sensitive 2-year yield fell for the second straight session on Friday, a day after Trump made an immediate “demand” for lower interest rates.

Read more: Trump tells Davos he’ll demand that interest rates drop. It’s a fresh jab at the Fed.

Then in an interview with Fox News that aired Thursday evening, Trump reportedly said that he’d rather not use tariffs on China — shifting toward a softer approach as he sticks to more broad-based rhetoric aimed at other countries.

Via phone, Peter Cardillo, chief market economist at Spartan Capital Securities, described Trump as taking a “less hawkish” stance toward China on tariffs. “Whether or not that’s just a bargaining tool … that’s yet to be seen.”

Meanwhile, Cardillo said, the Fed is likely to stick to a “wait-and-see” approach and watch what emerges on the inflation front and any potential price pressures from tariffs. “And that probably means rates stay on hold for the first quarter of the year,” he added.

Traders are looking ahead to next week’s meeting of the policy-setting FOMC, which is not expected to produce any change in the Federal Reserve’s main interest-rate target, according to the CME FedWatch Tool.

Data released on Friday showed that U.S. businesses were starting the new year in an upbeat mood, though inflation pressures may be rising again. Separately, existing-home sales fell in 2024 to a 4.06 million pace, the lowest since 1995.