U.S. Treasury yields fell Monday after investors juggled conflicting reports on the state of trade talks and the prospects for a phase one deal between Beijing and Washington.
What are Treasurys doing?
The 10-year Treasury yield
was down 2.4 basis points to 1.810%, after reaching as high as 1.855%, while the 2-year note rate
fell 1.8 basis points to 1.594%. The 30-year bond yield
edged 1.9 basis points lower to 2.292%.
Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
The bond-market rebounded from its selloff on Monday after CNBC reported that Beijing was pessimistic on a trade deal without a rollback of existing tariffs, citing a government source.
This contrasted with an earlier report from Chinese state media outlet Xinhua, which described talks between Vice Premier Liu He, Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer as “constructive.” White House economic adviser Larry Kudlow said on Thursday that both sides were getting closer to an agreement.
As for the Federal Reserve, Cleveland Fed President Loretta Mester was speaking at the University of Maryland.
In the afternoon, the widely-monitored Treasury International Capitol report will be released at 4 p.m. Eastern, offering significant clues on the investment activity of overseas bondholders.
Elsewhere, China’s central bank on Monday lowered a trial funding rate for the first time since October 2015, to 2.5% from 2.55%, indicating that the People’s Bank of China was taking steps to stimulate lending in the second-largest economy in the world.
What did market participants’ say?
We could be in “a trade limbo for quite a while,” said analysts at NatWest Markets, noting that while markets expect a deal, including additional Chinese tariffs for Dec. 15 to be delayed, that trading can be choppy until that time.