Monday, December 10, 2018


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U.S. President Donald Trump and China's President Xi Jinping leave a business leaders event at the Great Hall of the People in Beijing on November 9, 2017.

Nicolas Asfouri | AFP | Getty Images
U.S. President Donald Trump and China's President Xi Jinping leave a business leaders event at the Great Hall of the People in Beijing on November 9, 2017.

U.S. government debt yields slipped Monday after gaining overnight as investors digested the trade cease-fire brokered between the United States and China.

10-year Treasury note was seen trading lower at 2.997 percent at around 1:00 p.m. ET, while the benchmark on the 30-year Treasury bond also fell to 3.292 percent. Bond yields move inversely to prices.

It will still be “challenging” to find a compromise that all parties like, Goldman Sachs economist Alec Phillips wrote in a note to clients Sunday. While the truce between President Donald Trump and China’s Xi Jinping shows that each side is eager to reach an agreement, the brief cease-fire may not give trade representatives much time to discuss fundamental differences in economic policy, he added.

“While the Xi-Trump dinner has clearly improved the tone of the U.S.-China relationship for the time being, and we would expect an initial positive market reaction, the ‘pause’ prolongs the period of uncertainty around the eventual structure of trade relations between the two countries,” Phillips wrote. “The specter of higher and broader U.S. tariffs remains, and the underlying issues clouding the trade relationship are deferred to further negotiations.”

Xi and Trump agreed over the weekend to hold off on slapping additional tariffs on each other’s goods until March 1, as trade deliberations continue between both countries. In a White House readout of a dinner at the G-20 summit in Argentina, the two world leaders discussed a host of issues, including sanctions on $200 billion worth of Chinese imports to the U.S.

Meanwhile, U.S. fixed-income traders continue to be wary around the Federal Reserve’s upcoming policy meeting this month.

Jerome Powell, the central bank’s chairman, said last week that the benchmark interest rate was “just below” the neutral level. That remark appeared to backtrack from a previous statement by Powell in which he said rates were still a “long way” from the targeted neutral rate.

The Federal Open Market Committee, which sets the federal funds rate, will gather for a two-day meeting on December 18, where the central bank is strongly expected to hike interest rates.

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