Treasury yields rise as trade deal eases tensions

US Treasury yields rose on Monday as traders took an optimistic view of a preliminary US-China trade deal and drove stocks to new highs. The benchmark 10-year yield was 6.6 basis points higher at 1.8871% in afternoon trading, reflecting greater investor appetite for risk. Analysts focused on positive comments from US officials on a "phase one" US-China trade deal that is expected to nearly double US exports to China over the next two years.

China has remained cautious ahead of the signing of the agreement. US Trade Representative Robert Lighthizer said on CBS' "Face the Nation" program on Sunday that there would be some routine "scrubs" to the text, but "this is totally done, absolutely."

The preliminary US-China trade deal was reported late last week and investors had largely shrugged off the news. But on Monday the easing bilateral tensions seemed to restore investor confidence and stock indexes hit record highs, also helped by upbeat Chinese economic data.

John Herrmann, MUFG Securities rates strategist, said the enthusiasm for stocks would have pushed down bond prices and driven up yields on Monday. That fits a longer-term trend, he said, with the first half of 2020 looking promising with resilient US job and Gross Domestic Product growth.

"Flows were toward safe haven assets and toward less-risky assets, now in the past few months there's been a bit of a reversal," he said. The two-year yield, which typically moves in step with interest rate expectations, was up 4.1 basis points to 1.6447%.