Treasury yields hold ground amid U.S.-China trade optimism

Treasury yields were mostly unchanged on Monday in a holiday-shortened session amid hopes for further progress on U.S.-China trade negotiations.

The Securities Industry and Financial Markets Association recommends the bond market to close early on Monday, at 2 p.m. Eastern, ahead of New Year’s Day.

The 10-year Treasury note yieldTMUBMUSD10Y, -1.56% was down 0.6 basis points to 2.734%. The 2-year note yieldTMUBMUSD02Y, -1.56% fell a basis point to 2.526%, while the 30-year bond yieldTMUBMUSD30Y, -0.69% was down 0.6 basis point to 3.037%. Bond prices move in the opposite direction of yields.

On a yearly basis, the 10-year yield and the 30-year bond yield was up more than 30 basis points, while the 2-year note yield, sensitive to the Federal Reserve’s rate increases, doubled the rise of its longer-dated peers, climbing around 64 basis points.

Though 2018 was billed as the year for the bond bears, Treasury yields retraced much of their earlier rise, but still traded higher compared with the year’s start. Fears around wage inflation and fiscal stimulus gave way to U.S.-China trade concerns and a selloff in risk assets, which spurred a late-year rally in U.S. government paper.

See: Why these bond investors suspect the 10-year Treasury yield has peaked

President Donald Trump said in a tweet that a telephone call between him and China’s leader Xi Jinping had made advances toward a deal. Yet the Wall Street Journal reported that Trump may be exaggerating progress on trade talks, according to people familiar with the negotiations.

Meanwhile, a government shutdown is on track to roll over into 2019, as Trump and Congressional Democrats remained at loggerheads over demands for border-wall funding.

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