Treasuries Close Roughly Flat After Recovering From Early Weakness

(RTTNews) - After coming under pressure early in the session, treasuries regained ground over the course of the trading day on Monday.

Bond prices climbed well off their early lows before ending the day roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, closed unchanged at 3.997 percent after reaching a high of 4.033 percent.

Treasuries initially moved to the downside amid optimism about a potential U.S.-China trade deal ahead of a highly anticipated meeting between President Donald Trump and his Chinese counterpart Xi Jinping later this week.

Treasury Secretary Scott Bessent met with Chinese officials in Malaysia over the weekend and said he believes the talks have resulted in a "very successful framework" for Trump and Xi to discuss on Thursday.

Bessent also indicated he expects China to resume its purchases of U.S. soybeans and delay the export controls on rare earths that contributed to the recent increase in tensions.

On his way to Japan, Trump also expressed optimism about reaching a trade deal with China after signing separate trade and mineral agreements with his Malaysian and Cambodian counterparts.

Selling pressure waned over the course of the session, however, as traders also remain optimistic about the outlook for interest rates ahead of the Federal Reserve's monetary policy announcement this week.

With the Fed widely expected to lower rates by another quarter point when it announces its latest decision on Wednesday, traders are likely to pay close attention to the accompanying for clues about the likelihood of further rate cuts.

CME Group's FedWatch Tool is currently indicating a 97.8 percent chance the Fed will lower rates by a quarter point this week and a 9.0 percent chance of another quarter point rate cut in December.