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Treasuries Show Strong Move Back To The Upside

Following the pullback seen over the two previous sessions, treasuries showed a strong move back to the upside during trading on Monday.

Bond prices moved higher early in the session and climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slumped by 9.5 basis points to 1.639 percent.

With the steep drop on the day, the ten-year yield more than offset the jump seen late last week, ending the session at its lowest closing level in almost three years.

The rebound by treasuries came amid worries about a prolonged trade war between the U.S. and China after President Donald Trump recently indicated he feels no sense of urgency to resolve the dispute.

Trump told reporters last Friday that he is "not ready to make a deal" with China and suggested the U.S. could skip the next round of trade talks in September.

"We'll see whether or not we keep our meeting in September. If we do, that's fine. If we don't, that's fine," Trump said. "But it's time that somebody does what we're doing."

Trump denied that Americans are paying the price for his trade war with China, arguing that Beijing's efforts to depress their currency prove that the Chinese are "paying for it."

"I want them to do well. But as of this moment, they're having the worst year that they've had in many, many years — in decades," he added. "And really, we're just bringing the system back into order."

Concerns about the impact of increasingly violent protests in Hong Kong also increased the appeal of bonds, with the Hong Kong International Airport canceling all departing flights due to the disruption caused by protesters.

The pro-democracy demonstrations in Hong Kong have intensified following allegations of unnecessary police violence on Sunday.

A report on consumer price inflation may attract attention on Tuesday, as the data could impact the outlook for future interest rate cuts.

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