June 28, 2019 / 1:30 PM / 3 months ago

TREASURIES-Yields rise before U.S.-China trade talks

    * U.S.-China trade talks on Saturday in focus
    * Quarter-end rebalancing seen helping bond demand
    * U.S. consumer spending increased moderately in May

    By Karen Brettell
    NEW YORK, June 28 (Reuters) - U.S. Treasury yields edged
higher on Friday as investors waited on talks between U.S. and
China on Saturday for signs that leaders will de-escalate a
trade war that has been blamed for harming global economic
growth.
    U.S. President Donald Trump on Friday said he hoped for
productive talks with Chinese President Xi Jinping, but added
that he had not made any promises about a reprieve from
escalating tariffs.             
    Bond trading was muted as investors were seen as reluctant
to take large positions before the talks, given the uncertainty
of the outcome.
    “I don’t think too many people are all that enthusiastic
about leaving for the weekend with a sizable position either
way, because of the unknowns surrounding the G20,” said Tom
Simons, a money market economist at Jefferies in New York.
    Trump and Xi will meet for the first time in seven months to
discuss deteriorating ties between the world's two largest
economies at the G20 summit in Japan.             
    The ongoing U.S.-China trade war is being blamed for slowing
international growth and adding more pressure on central banks
to adopt looser policies.
    The U.S. Federal Reserve is seen as certain to cut interest
rates when it meets in July.
    Yields have hovered around the two percent level after
dropping to an almost three-year low of 1.974 percent last week,
after the U.S. central bank signaled interest rate cuts as soon
as July to battle growing global and domestic economic risks.
            
    Demand for bonds from investors rebalancing accounts for
quarter-end is expected to provide some support for the market
on Friday.
    Data on Friday showed that U.S. consumer spending increased
moderately in May and prices rose slightly, pointing to slowing
economic growth and benign inflation pressures.             


 (Editing by Chizu Nomiyama)
  
 
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