August 31, 2018 / 8:21 PM / 3 months ago

REFILE-TREASURIES-Long-dated bond yields rise as U.S.-Canada trade talks end without deal

(Adds phrase ‘long-dated’ in headline)

By Kate Duguid

NEW YORK, Aug 31 (Reuters) - Yields on longer-dated U.S. Treasuries rose on news that Canada and the United States had failed to reach an agreement on the North American Free Trade Agreement before the deadline on Friday set by President Donald Trump.

Trump told the U.S. Congress on Friday he plans to sign a trade deal with Mexico in 90 days, which Canada could join “if it is willing,” Trump’s top trade official said.

In a statement, U.S. Trade Representative Robert Lighthizer said U.S. officials would resume talks with their Canadian counterparts next Wednesday with the aim of getting a deal all three nations could sign.

Treasuries have largely benefited from rising trade tensions, as investors see them as a safe-haven investment and the most likely beneficiary of Trump’s protectionist policies. However, the market interpretation of Friday’s news suggest that traders believe the long-term economic health of the United States would decline if a new NAFTA treaty were not signed.

Longer-dated securities rose on Friday afternoon’s news, with the 30-year bond yield at a session high of 3.025 percent, up 1.9 basis points from Thursday’s close.

Trade tensions had also ratcheted up this week after the European commissioner in charge of trade on Thursday said the European Union’s detente on tariffs with the United States had not put to rest “profound disagreements” on trade policy. A Bloomberg report that Trump was considering implementing $200 billion worth of new sanctions on Chinese goods next week also added to trade tensions.

In the coming week, “a reaction from the United States’ largest trading partner should prove the most relevant tone-setting event,” BMO Capital Markets analysts wrote.

Reporting by Kate Duguid Editing by Dan Grebler and Chizu Nomiyama

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