US Treasuries yields rose on Tuesday on a report that US negotiators are heading to China to discuss trade terms, boosting hopes that the two countries may deescalate a trade war that has weighed on economic growth.
Trade Representative Robert Lighthizer and senior US officials will travel to Shanghai on Monday for face-to-face trade meetings with Chinese officials, Bloomberg reported.
It comes after the International Monetary Fund on Tuesday lowered its forecast for global growth this year and next, warning that more US-China tariffs, auto tariffs or a disorderly Brexit could further slow growth, weaken investment and disrupt supply chains.
Benchmark 10-year Treasury yields fell 9/32 in price to yield 2.072%, up from 2.043% on Monday. The yields have held between 2.023% and 2.078% for four consecutive trading sessions.
Investors are focused on upcoming central bank meetings for new signals about how many interest rate cuts are likely in Europe and the United States.
The European Central Bank (ECB) is expected to signal easier monetary policy when it meets on Thursday.
The Federal Reserve is seen as certain to cut its benchmark rate at its July 30-31 meeting.
Though a 25-basis-point cut by the Fed is viewed as more likely than a deeper one, some analysts have argued that a 50- basis-point decrease would be more effective at stimulating the economy and offsetting concerns about slowing global growth.
"I think if they do 25 basis points both the bond market and the stock market will sell off, because I think the market will be disappointed they didn't do 50 basis points," said Tom di Galoma, a managing director at Seaport Global Holdings.
Interest rate futures traders are pricing in a 79% chance of a 25-basis-point cut and a 21% chance of a 50-basis-point one, according to the CME Group's FedWatch tool.
The Treasury Department sold $40 billion in two-year notes to soft demand on Tuesday, the first sale of $113 billion in short and intermediate-dated notes this week.