China talks front and center on bond investors’ radar

Trump says 80% tariffs on China imports seem right

Fed fund futures lower odds of July easing

By Gertrude Chavez-Dreyfuss

NEW YORK, – U.S. Treasury yields were flat overall on Friday, with thinner volume than usual and sentiment still uncertain, as investors looked ahead to talks between the Trump administration and China over the weekend in Geneva on tariffs.

Market participants said there was a bit of short-covering that went on in Treasuries following a selloff on Thursday that pushed yields to multi-week highs, amid a U.S.-UK trade deal.

That deal was the first since President Donald Trump imposed worldwide tariffs on April 2, sparking a rally in U.S. equities, and the dollar. It also helped pushed Treasury prices lower and yields higher, as investors looked to take on more risk.

Trump said more deals are set to follow the UK trade pact.

Switzerland is also among the countries seeking to strike a quick deal to reduce those tariffs, and Swiss President Karin Keller-Sutter said it was towards the front of the line after “positive” discussions.

“The tail risk that we’re not going to budge on any of the big numbers from April 2nd is now easing. That is what the market is finding solace in, even though there is no full clarity,” said Vishal Khanduja, head of broad markets fixed income at Morgan Stanley Investment Management in Boston.

“Hopefully these small treaties that we are coming up with will give more clarity not only for other nations, but also the market, like what is the starting point and the ending point for these tariffs.”

Ahead of the China negotiations, Trump said on Friday that an 80% tariff on Chinese goods “seems right,” making his first suggestion of a specific alternative to the 145% levies he has imposed on China.

U.S. stock futures briefly dipped earlier after the Trump news, while the 10-year yield slipped. Wall Street shares were last little changed to slightly lower on the day in the run-up to the China meeting.

The U.S. president’s comments did not match earlier speculation, reported by Bloomberg, that Treasury Secretary Scott Bessent, who is heading the U.S. delegation, and his group have set a target of reducing tariffs below 60% as a first step.

Mike Venuto, co-founder and chief investment officer at Tidal Financial Group in New York, was not optimistic about the upcoming China talks.

“It will take more time than we want to. I would expect further uncertainty because trade deals even when you have good partners which are working in good faith will take a year to work out,” he said.

“What we have seen so far is simply symbolic. There’s a lot of wood to chop. People are just looking for any piece of good news that is more or less sustainable.”

In afternoon trading, the benchmark 10-year yield was last flat on the day at 4.374%, but rose 5.6 basis points on the week overall for a second straight week of gains. On Thursday, following the UK trade deal, the yield hit a two-week high.

U.S. 30-year yields, meanwhile, were also little changed at 4.833%, but climbing 4.3 bps this week, also posting its second consecutive week of gains.

On the front end of the curve, the two-year yield , which reflects interest rate expectations, slipped 1 basis point to 3.885 after hitting a three-week peak on Thursday. On the week, the yield advanced 4.5 bps, rising for two straight weeks as well.

Federal Reserve speakers on Friday, meanwhile, did not say anything earth-shattering, indicating that policy remains on hold for the foreseeable future given tariff uncertainty.

Following the UK trade agreement, the benchmark federal funds futures market has lowered the odds of a rate cut at the July 29-30 policy meeting to 60%, from around 70% on Wednesday, according to LSEG calculations. It also sees about 68 bps of easing this year, down from 82 bps on Wednesday.

This article was generated from an automated news agency feed without modifications to text.