U.S. government debt yields slipped on Monday despite trade negotiations between the United States and China reaching their “final stages.”
At 9:31 a.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at 2.748 percent, while the yield on the 30-year Treasury bond was also lower at 3.113 percent.
Sources told CNBC that U.S.-China trade negotiations are nearing completionas the two sides prepare for a possible summit at President Donald Trump’s Florida golf club, Mar-a-Lago, at the end of March. Among possible U.S. concessions are a rollback in tariffs on at least $200 billion in Chinese goods. China, meanwhile, is anticipated to remove or cut industry-specific levies like those on autos.
The U.S. wants the ability to re-introduce duties on Chinese goods if talks fail on enforcement mechanisms on intellectual property theft, a provision opposed by Beijing.
The New York Times also said in another report that the trade deal being discussed would do little to address key structural issues, including efforts by China to curb cybertheft and subsidies the Trump administration argues make it harder for U.S. companies to compete with their Chinese rivals.
Federal Reserve Chairman Jerome Powell said last week it is “beyond consideration” for the U.S. not to repay all of its debt. The remarks come at a time when Congress battles with a higher level of spending. In a prepared statement, Powell also told lawmakers Tuesday that while the U.S. economy looks strong, there are some worrying signs on the horizon.
For Wells Fargo rates strategist Michael Schumacher, big economic releases like the Labor Department’s monthly jobs report are becoming more important to the market as they become more important to central bankers.
“As far as jobs goes, when you think about the big economic numbers … we think they’re going to be more and more influential because it’s obvious that the Fed is at a turning point,” Schumacher said.
In October, Powell said the central bank was “a long way” from a neutral overnight lending rate, and in December commented that the process of reducing the balance sheet was on “autopilot.” Those comments appeared to spook the markets throughout the final month of 2018 until the Fed chair and others soften their stance and suggested a more data-dependent path forward.
“Powell didn’t really change his tone last week,” Schumacher added. “The bigger issue is does the Fed change its statement on March 20: The updated dot will be pretty interesting.”