By Daniel Kruger 

U.S. government-bond prices fell Tuesday after the White House said it would grant temporary exemptions to an export blacklist against Huawei Technologies, raising hopes of a thaw in trade tensions.

The yield on the benchmark 10-year Treasury note rose for a second consecutive trading session, settling at 2.428% from 2.416% Monday.

Yields, which rise as bond prices fall, climbed with investors continuing to see potential for a trade deal between the U.S. and China before the U.S. increases its tariffs on imports from China to 25% from 10%. The levies are set to take effect on June 1.

An escalation of conflicts in global trade is slowing growth, according to the Organization for Economic Cooperation and Development, which lowered its forecast for global economic growth this year to 3.2% from 3.3% in March. At the same time it raised its growth projection for the U.S. to 2.8% from 2.6%.

Investors see a range of impacts from the escalation in trade tensions between the two largest economies. Prices on consumer goods imported from China may increase, which some investors think could lead to a higher rate of inflation. Others see higher prices leading to a slowdown in purchases as consumers recoil from higher prices, leading to a slowdown in economic activity.

Federal Reserve officials have discussed allowing the rate of inflation to rise for some time above the central bank's target of 2% to compensate for periods where it has remained below the level officials think is optimal for promoting growth. Recently inflation has remained below the Fed's target.

One way for the Fed to speed inflation would be to lower interest rates, which would encourage more borrowing and spending. Fed-funds futures, which investors use to bet on the path of central bank policy, show investors see roughly two-in-three odds of a rate cut by the end of this year.

Yet, there are "few signs the Fed is going to be willing to provide a cut," said Sean Simko, head of portfolio strategies at SEI Investments. "The market at this point is a little ahead of itself."

Fed officials have forecast that they will raise interest rates one time in 2020. That suggests if policy makers want to let inflation run above target, they will do so by holding back from potential rate increases rather than by lowering rates, Mr. Simko said.

Write to Daniel Kruger at Daniel.Kruger@wsj.com

(END) Dow Jones Newswires

May 21, 2019 17:17 ET (21:17 GMT)