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Treasuries Give Back Ground Following Recent Strength

After moving sharply higher over the past several sessions, treasuries gave back some ground during trading on Monday.

Bond prices came under pressure in early trading and remained firmly negative throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.8 basis points to 1.553 percent.

Profit taking contributed to the pullback by treasuries, with the ten-year yield bouncing off its lowest closing level in a month.

Traders may have been wary of having too much money in bonds ahead of the next round of high-level trade talks in Washington later this week.

Ahead of the talks, scheduled to begin on Thursday, a report from Bloomberg News said Chinese officials are signaling they're increasingly reluctant to agree to the broad trade deal being pursued by President Donald Trump.

Citing people familiar with the discussions, Bloomberg said senior Chinese officials have indicated the range of topics they're willing to discuss has narrowed considerably.

An offer from Chinese Vice Premier Liu He would purportedly not include reforming Chinese industrial policy or government subsidies.

The negotiations come as the trade war continues to hang over the economy, with a survey by the National Association for Business Economics showing 53 percent of economists see trade policy as the key downside risk to the economy.

The NABE said four out of five panelists believe that risks to the economic outlook are weighted to the downside, an increase from the 60 percent who held this view in June.

"The panel turned decidedly more pessimistic about the outlook over the summer, with 80% of participants viewing risks to the outlook as tilted to the downside," said Survey Chair Gregory Daco, chief U.S. economist at Oxford Economics.

He added, "The rise in protectionism, pervasive trade policy uncertainty, and slower global growth are considered key downside risks to U.S. economic activity."

A report on producer price inflation may attract attention on Tuesday along with remarks by Federal Reserve Chairman Jerome Powell.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auction of $38 billion worth of three-year notes.

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