March 4, 2019 / 3:42 PM / 9 months ago

TREASURIES-Trade talk progress does little to move yields

NEW YORK, March 4 (Reuters) - Treasury yields on Monday morning were little changed with the yield curve modestly flatter, despite positive developments in U.S.-China trade talks.

U.S. President Donald Trump and Chinese President Xi Jinping could reach a formal trade deal at a summit around March 27 given progress in talks between the two countries, the Wall Street Journal reported on Sunday.

The two nations have imposed tit-for-tat tariffs on billions of dollars worth of each others’ goods, roiling financial markets, disrupting manufacturing supply chains and shrinking U.S. farm exports.

Treasury debt prices, which typically rise in times of geopolitical uncertainty and move inversely to yields, were mixed in morning trade. Longer-dated yields were lower by just over half a basis point, while yields at the short end of the curve were flat, or less than half a basis point higher.

“I think the market is ignoring some of the positive news overnight,” said Gennadiy Goldberg, interest rates strategist at TD Securities.

Treasury investors have priced in some possibility of a deal already, he said, so “the market is waiting for a (U.S.-Chinese) deal to be signed, sealed and delivered until it prices in anything more.”

The yield on the benchmark 10-year note was last down about half a basis point from Friday’s close. The seven- and 30-year yields were also lower, with the biggest move across all maturities in the latter, down 0.8 basis point.

The two-year yield, which reflects traders expectations of interest rate increases, was unchanged at 2.559 percent. The Treasury yield curve, the spread between two- and 10-year yields, was slightly flatter, last at 18.9 basis points. That compared with 19.8 basis points at Friday’s close.

Trading was range-bound. “The range is your friend until something happens to break us out of it,” said Goldberg.

Several Federal Reserve speeches this week as well as the federal government’s jobs report on Friday could disrupt yields. New York Fed President John Williams, who moved Treasuries in February when he suggested the central bank may need to reassess the way in which it sets its inflation target, will speak on Wednesday. Fed Governor Lael Brainard will speak Thursday and Fed Chair Jerome Powell will speak on Friday.

Reporting by Kate Duguid and Steve Orlofsky

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