February 11, 2019 / 7:40 PM / 5 months ago

TREASURIES-Yields rise with inflation data, trade talks in focus

 (Adds quote, updates prices)
    * Inflation data on Wednesday next major economic focus
    * U.S. and China meet to discuss trade agreements
    * Senator says talks to avert another U.S. shutdown are

    By Karen Brettell
    NEW YORK, Feb 11 (Reuters) - U.S. Treasury yields edged
higher on Monday as investors awaited data on Wednesday that
will show inflation pressures in January, and as investors
focused on trade talks between the United States and China.
    Yields have fallen as Federal Reserve officials, including
Chairman Jerome Powell, adopt a much more dovish tone on further
rate increases, and on concerns about slowing international
    Consumer price data will be the next indication of whether
prices are rising, a prerequisite for further rate hikes.
    “For the most part, we are kind of in a holding pattern
until we get the CPI data later this week,” said Tom Simons, a
money market economist at Jefferies in New York.
    “The burden of proof on inflation data now is to try to
convince the market that things are going to turn around,”
Simons said. However, “not only do you need to see more positive
inflation data but you also need to see it over a number of
months also, one individual print isn’t going to do it.”
    Benchmark 10-year notes             fell 8/32 in price to
yield 2.661 percent, up from 2.632 percent on Friday. The yields
have fallen from 2.799 percent on Jan. 18 and are down from a
seven-year high of 3.261 percent in October.
    Yields also rose as investors took profits after the notes
on Friday tested technical support at around 2.62 percent.
    “Right now we are sitting near the Jan. 31st lows. We are
seeing a bit of profit-taking today after those technical levels
held on Friday,” said John Canavan, market strategist at Stone &
McCarthy Research Associates in New York. 
    China struck an upbeat note on Monday as trade talks
resumed, but also expressed anger at a U.S. Navy mission through
the disputed South China Sea, casting a shadow over the prospect
for improved Beijing-Washington ties.             
    The U.S. is expected to keep pressing longstanding demands
that China reform how it treats American companies' intellectual
property as the two countries work to seal a trade deal that
could prevent tariffs from rising on Chinese imports. 
    A trade deal between the two countries could be positive as
it would bolster expectations of future inflation.
    Other potential market catalysts include talks to avert
another U.S. government shutdown. The top four Democratic and
Republican negotiators in the U.S. Congress on border security
funding plan to meet on Monday in a bid to reach a deal by a
Friday deadline to avert another partial government shutdown.

 (Additional reporting by Richard Leong in New York
Editing by Nick Zieminski)
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