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US Treasuries come under pressure, pushing up yields as trade remains in focus

posted onNovember 18, 2019
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US government debt prices traded lower Monday morning as investors extended bets on a near-term U.S.-China trade deal. The yield on the benchmark 10-year Treasury note traded higher at 1.8394%, while the yield on the 30-year Treasury bond traded higher at 2.3177%, CNBC reported. Bond yields move inversely to prices.

The moves followed weekend comments from Chinese state-backed news agency Xinhua, which reported "constructive discussions" between Washington and Beijing  about “each other’s core concerns” in a high-level phone call that included Vice Premier Liu He, U.S. trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.  

The report raised hopes of at least an interim agreement on tariffs and agricultural purchases between the two economic powerhouses. However, the two sides offered no new details about the accord. Xinhua's report came after White House economic advisor Larry Kudlow said late last week the world's two largest economies were “getting close” to a deal.

For more than a year the U.S. and China have been locked in a trade dispute that has rattled international markets and has thrown the global economy off balance. Over the last 18 months, Washington has imposed tariffs on $550 billion worth of Chinese imports, while Beijing has reciprocated by implementing tariffs on $185 billion worth of imports from the U.S. 

Meanwhile, the People's Bank of China surprised markets on Monday by cutting a key interest rate for the first time since 2015. The move stoked hopes of more stimulus measures to revive the slowing economy. 

On the auction front, the US Treasury Department is set to auction a three-month and a six-month bill on Monday. 

Looking to later this week, bonds are likely to be sensitive to minutes of the Federal Reserve’s last policy meeting, set to be released on Wednesday. T US central bank has cut interest rates three times in recent months. 

“The minutes are likely to reiterate that the U.S. economy is ‘solid’ and that current monetary policy settings are ‘appropriate’, which would support the dollar,” Joseph Capurso, a currency analyst at Commonwealth Bank of Australia told Reuters.

Another theme likely to dominate thinking of investors and traders in the week is European Central Bank's policy meeting on Thursday. The Frankfurt-based institution is widely expected to cut interest rates pushing its deposit rate further into negative territory, while possibly moving to restart a bond-buying program that it completed in December.