Treasuries Give Back Ground Amid Optimism About Trade Talks

After initially showing a lack of direction, treasuries moved to the downside over the course of the trading session on Wednesday.

Bond prices came under pressure in mid-day trading and remained firmly negative going into the close. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.4 basis points to 2.482 percent.

The pullback by treasuries came amid renewed optimism upcoming U.S.-China trade talks could result in a long-term trade deal between the world’s two largest economies.

White House Press Secretary Sarah Sanders told reporters there are “indications” the Chinese would like to strike a deal in the coming days, reiterating a claim President Donald Trump made on Twitter earlier in the day.

Trump noted Chinese Vice Premier Liu He will be a part of the talks, claiming the high-ranking official is “coming to the U.S. to make a deal.”

“We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers…great for U.S., not good for China!” Trump tweeted.

Trump also claimed China is attempting to pull back from previously negotiated terms of a trade deal in order to strike a new deal with a Democratic president that continues to rip off the U.S.

Meanwhile, China’s Commerce Ministry said the communist country will take “necessary countermeasures” if the U.S. follows through on a planned increase in tariffs on Chinese goods on Friday.

Treasuries saw some further downside following the release of the results of the Treasury Department’s auction of $27 billion worth of ten-year notes, which attracted below average demand.

The ten-year note auction drew a high yield of 2.479 percent and a bid-to-cover ratio of 2.17, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.50.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

On Thursday, the Treasury is due to finish off this week’s long-term securities auctions with the sale of $19 billion worth of thirty-year bonds.

Any news out of the U.S.-China trade talks will attract attention on Thursday, although traders are also likely to keep an eye on reports on weekly jobless claims, the U.S. trade deficit, and producer prices.

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