US 10-yr yield rises as Trump expresses optimism on China tension

NEW YORK: US Treasury yields on most maturities edged higher on Monday, for the fourth time in the last five sessions, as a recovery of risk appetite accompanied a rally on Wall Street after the United States sought to ease concerns about a trade conflict with China.

The gains in yield, however, were not that significant given the rise in US equities and analysts said this reflected persistent uncertainty between the United States and China on proposed trade tariffs.

"Just by the fact that stocks were so strong, I would have expected the yields on the long end to be even higher," said Lou Brien, market strategist, at DRW Trading in Chicago.

"I think there is still a lot of uncertainty and that generally puts a bid to the Treasury market."

Brien cited the Boao Asia forum later this evening in which China's President Xi Jinping will give the keynote address. The Boao Forum is the equivalent of the Davos World Economic Forum, he added.

"In light of the trade tensions with the US, this is a highly anticipated speech. And that may have prevented Treasuries from having a big selloff today," Brien said.

Earlier, the Trump administration sought to minimize the ongoing trade dispute with China.

President Donald Trump in Twitter posts on Sunday referred to his personal relationship with Chinese President Xi Jinping and said the two men would always be friends, adding, "Great future for both countries!"

Trump's chief economic adviser, National Economic Council Director Larry Kudlow, also tried to minimize fears of a trade war. In an interview on CNN's State of the Union show on Sunday, Kudlow said: "This process might turn out to be very benign."

The auction of $64 billion in Treasuries this week has also weighed on prices, which move inversely to yields. Traders typically sell Treasuries to push up the yield so they can buy it at a lower price at the auction in a practice known as "concession."

"The move higher in rates appears to have stabilized over the past several weeks as the Fed appears intent on maintaining a gradual pace of rate hikes," said Gennadiy Goldberg, interest rates strategist at TD Securities in New York.

"This relative stability should draw in additional buyers, though much will depend on whether yields are at the top or bottom of the range going into the auctions."

In late trading, US 10-year yields rose to 2.782 percent , from 2.775 percent late on Friday.

US 30-year yields, however, slipped to 3.015 percent , from Friday's 3.017 percent.