Prices inch higher as Fed policy in focus after Friday's selloff

NEW YORK: US Treasury prices gained on Monday, partially reversing Friday's losses, 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 US 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 York.

Monday's move is "a natural retracement from Friday's very large move," Goldberg said, adding that there's also "quite a lot of uncertainty out there, which is why there might have been some investors who are keen to really push rates lower again today."

Benchmark 10-year notes gained 3/32 in price to yield 2.650 percent, from 2.659 percent on Friday. The yields fell as low as 2.543 in overnight trading on Thursday before the jobs report, which was 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 pricing in a partial rate cut for this year, while the Fed has indicated that two rate hikes are likely.

Investors are also focused on trade talks between the United States and China.

US officials are meeting their counterparts in Beijing this week for the first face-to-face talks since US 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.