US Treasury yields held below three-month highs on Thursday after President Donald Trump reiterated that the United States is close to signing a trade deal with China, and before consumer price inflation data on Wednesday.
Trump on Tuesday said that the two countries are close to a deal that would end the trade war that has damaged global growth, but added that if a deal is not made, the United States will raise tariffs on Chinese imports.
Optimism that the two countries will reach a deal to roll back tariffs as part of its "phase one" deal has boosted stocks and reduced demand for safe haven US bonds in the past week.
Bonds didn't make any large moves on Trump's comments, however, with investors now turning attention to consumer price inflation data on Wednesday and retail sales on Friday for further clues about the strength of the US economy.
Federal Reserve Chairman Jerome Powell is also due to speak to lawmakers on Wednesday.
"Those data points might be a little bit more consequential than anything that I can see came out of the speech," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York.
Benchmark 10-year notes gained 3/32 in price to yield 1.923%. The yields rose to 1.973% on Thursday on optimism a trade deal would be reached, which was the highest since August 1.
Optimism about the US economy has increased since jobs data for October and a service sector report last Tuesday beat expectations.
If the data deteriorates, however, the Fed is seen as likely to resume cutting interest rates.
"Fed speakers in general have been unanimous in characterizing the economy as being in a good place, so I think it's going to be about incoming data that guides the Fed on policy action," Rajappa said.
The US central bank cut rates last month for the third time this year and indicated that additional rate decreases may be unlikely in the near term.
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