January 7, 2019 / 2:29 PM / 6 months ago

TREASURIES-Prices inch higher as Fed policy in focus after Friday's selloff

    * Prices retrace part of Friday's selloff
    * U.S. and China resume trade talks
    * U.S. Treasury to sell $78 bln supply this week 

    By Karen Brettell
    NEW YORK, Jan 7 (Reuters) - U.S. Treasury prices gained on
Monday, partially reversing  Friday’s losses, as investors
evaluated the likelihood of further Federal Reserve rate hikes
this year and as the United States and China resumed trade
    Bond yields rose and stocks rallied on Friday after Fed
Chairman Jerome Powell sought to ease market concerns that the
U.S. central bank was ignoring signs of an economic slowdown,
saying he was aware of the risks and would be patient and
flexible in policy decisions this year.             
    That came after December’s jobs report showed that employers
added 312,000 workers to their payrolls, the most in 10 months,
while average hourly earnings rose 11 cents, or 0.4 percent.
    “You had a blockbuster payroll number and Powell basically
giving the market exactly what it wanted,” said Gennadiy
Goldberg, an interest rate strategist at TD Securities in New
    Monday’s move is “a natural retracement from Friday’s very
large move,” Goldberg said, adding that there’s also “quite a
lot of uncertainty out there, which is why there might have been
some investors who are keen to really push rates lower again
    Benchmark 10-year notes             gained 3/32 in price to
yield 2.650 percent, from 2.659 percent on Friday. The yields
fell as low as 2.543 in overnight trading on Thursday before the
jobs report, which was the lowest since January 2018.
    The yields have tumbled from 3.05 percent at the beginning
of December as concerns about slowing international growth and
Fed rate increases prompted a sharp selloff in stocks.
    Interest rate futures traders are now pricing in a partial
rate cut for this year, while the Fed has indicated that two
rate hikes are likely.
    Investors are also focused on trade talks between the United
States and China.
    U.S. officials are meeting their counterparts in Beijing
this week for the first face-to-face talks since U.S. President
Donald Trump and China's President Xi Jinping agreed in December
to a 90-day truce in a trade war.             
    The Treasury Department will sell $78 billion in
coupon-bearing supply this week, including $38 billion in
three-year notes on Tuesday, $24 billion in 10-year notes on
Wednesday and $16 billion in 30-year bonds on Thursday.

 (Editing by Frances Kerry)
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