January 7, 2019 / 7:11 PM / 7 months ago

TREASURIES-Yields rise with stocks as Fed policy, trade talks in focus

 (Adds data, updates prices)
    * Stock gains reduce demand for safe haven bonds
    * U.S. and China resume trade talks
    * U.S. Treasury to sell $78 bln supply this week 

    By Karen Brettell
    NEW YORK, Jan 7 (Reuters) - U.S. Treasury prices fell on
Monday, extending losses from Friday, as investors evaluated the
likelihood of further Federal Reserve rate hikes this year and
as the United States and China resumed trade talks.
    Bond yields rose and stocks rallied on Friday after Fed
Chairman Jerome Powell sought to ease market concerns that the
U.S. central bank was ignoring signs of an economic slowdown,
saying he was aware of the risks and would be patient and
flexible in policy decisions this year.             
    That came after December’s jobs report showed that employers
added 312,000 workers to their payrolls, the most in 10 months,
while average hourly earnings rose 11 cents, or 0.4 percent.
    “You had a blockbuster payroll number and Powell basically
giving the market exactly what it wanted,” said Gennadiy
Goldberg, an interest rate strategist at TD Securities in New
    Benchmark 10-year notes             fell 6/32 in price to
yield 2.680 percent, up from 2.659 percent on Friday. The yields
fell as low as 2.543 in overnight trading on Thursday, the
lowest since January 2018.
    The yields have tumbled from 3.05 percent at the beginning
of December as concerns about slowing international growth and
Fed rate increases prompted a sharp selloff in stocks.
    Interest rate futures traders are now partially pricing in a
rate cut for this year, while the Fed has said that two rate
increases are likely.
    The U.S. central bank will release minutes from its December
meeting on Wednesday. Powell is also due to speak on Thursday.
    Bond yields and stocks pushed higher on Monday even after
data was less bullish on the economy, showing that the growth of
U.S. services industries slowed to a five-month low in December.
    Investors are also focused on trade talks between the United
States and China.
    U.S. officials are meeting their counterparts in Beijing
this week for the first face-to-face talks since U.S. President
Donald Trump and China's President Xi Jinping agreed in December
to a 90-day truce in a trade war.             
    The Treasury Department will sell $78 billion in
coupon-bearing supply this week, including $38 billion in
three-year notes on Tuesday, $24 billion in 10-year notes on
Wednesday and $16 billion in 30-year bonds on Thursday.

 (Editing by Frances Kerry and Lisa Shumaker)
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