Treasury yields increased on Monday following a trade agreement between the U.S. and China to reduce tariffs on each other’s goods. The 10-year Treasury yield rose by 5.8 basis points to 4.431%, while the 2-year Treasury yield climbed over 10 basis points to 3.983%. One basis point equals 0.01%, and yields move inversely to prices. The U.S. and China negotiated a deal to lower tariffs, suspending most levies on imports from each other. Tariffs will decrease from 125% to 10%, though the U.S.’s 20% duties on Chinese imports related to fentanyl remain in place, keeping total tariffs on China at 30%. This development, alongside last week’s U.S.-UK trade deal, indicates a positive shift in trade relations. The effective U.S. tariff rate on China was previously 145%, with China imposing 125% levies on U.S. goods. Concerns about a potential recession due to high tariffs have lessened. U.S. Treasury Secretary Scott Bessent stated that talks were productive and resulted in a 90-day pause and a substantial reduction in tariff levels. He expects further discussions with China in the coming weeks. The likelihood of a Federal Reserve rate cut has decreased as the central bank may not need to intervene if a recession is avoided. — new from CNBC
