Treasury yields rise

US Treasury yields rose for a third day on Tuesday, in line with higher US stocks, as optimism over a trade deal between the United States and China boosted risk appetite. Trade talks will continue in Beijing for an unscheduled third day as the world's two largest economies looked to resolve their bitter trade dispute.
US President Donald Trump earlier on Tuesday wrote on Twitter that "Talks with China are going very well!" "I think the market's reacting to the latest Trump tweet about progress on the China negotiations," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York.
Still, uncertainty over whether a deal with China will be struck and concerns about the impact of an ongoing partial US government shutdown were seen as weighing on risk sentiment in the short term. Bond yields and US stocks have risen since Federal Reserve Chairman Jerome Powell on Friday said he was aware of the risks of an economic slowdown and would be patient and flexible in policy decisions this year.
That came after a strong US jobs report for December showing employers added 312,000 workers to their payrolls. Benchmark 10-year notes fell 9/32 in price on Tuesday to yield 2.712 percent, up from 2.682 percent on Monday. The yields fell as low as 2.543 percent 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 global growth and Fed rate increases prompted a sharp selloff in stocks.
Market volatility has boosted expectations that the US central bank will not raise rates this year even though the Fed has signaled two hikes are likely. Investors will be looking for new clues on interest rate policy when the Fed releases minutes from its December meeting on Wednesday and in a speech on Thursday by Powell.
Yields rose to session highs on Tuesday after the Treasury Department sold $38 billion in three-year notes to relatively soft demand, the first sale of $78 billion in coupon-bearing supply this week. The ratio of bids to notes offered was 2.44, the lowest reading since April 2009. The government will also sell $24 billion in 10-year notes on Wednesday and $16 billion in 30-year bonds on Thursday.