August 30, 2019 / 1:49 PM / 21 days ago

TREASURIES-Yields rise as trade optimism boosts stocks

    * Yields rise as risk sentiment improves
    * Month-end demand caps bond weakness
    * Consumer spending rose in July

    By Karen Brettell
    NEW YORK, Aug 30 (Reuters) - U.S. Treasury yields edged
higher on Friday as stocks rose on hopes that the United States
and China will take steps to de-escalate their trade war, which
has been blamed for worsening business sentiment.
    The two countries gave signs on Thursday that they will
resume trade talks as the two economic superpowers discussed the
next round of in-person negotiations in September ahead of a
looming deadline for additional U.S. tariffs.             
    A new round of U.S. tariffs on some Chinese goods is
scheduled to take effect on Sunday, threatening to escalate the
already bitter trade war.
    Demand for Treasuries for month-end extension was seen
capping bond weakness on Friday, though trading volumes were
light ahead of Monday’s U.S. Labor Day holiday.
    “It’s a decent-size extension, but volumes are very, very
light as to be expected ahead of the holiday,” said Justin
Lederer, an interest rate strategist at Cantor Fitzgerald in New
York.
    The bond market will be closed on Monday.
    Investors are likely to remain nervous about the impact of
worsening U.S.-Sino trade relations as economic growth weakens
globally, which should maintain demand for safe-haven debt.
    "It definitely feels like there are buyers of safe havens
around the globe," said Lederer.
    The yield curve between 2-year and 10-year notes on
Wednesday was the most inverted since 2007 at minus 6.50 basis
points, a signal that a recession is likely in one to two years.
 The curve                was last minus 1.30 basis points.
    Thirty-year bond yields             fell to record lows of
1.905% on Wednesday as investors sought out safe-haven debt.
They rose back to 1.987% on Friday.
    Data on Friday showed that U.S. consumer spending increased
solidly in July as households bought a range of goods and
services, though the pace of growth in consumption is unlikely
to be sustained amid tepid income gains.             

  
 
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