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Treasuries Move Notably Lower Amid Optimism About Trade Deal

Extending the pullback seen over the course of the previous session, treasuries showed a notable move to the downside during trading on Monday.

Bond prices came under pressure in morning trading and remained firmly negative throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.8 basis points to 1.786 percent.

The continued weakness among treasuries came as traders remain hopeful about a U.S.-China trade agreement, with Commerce Secretary Wilbur Ross expressing optimism phase one of a trade deal could be signed this month.

"We're in good shape, we're making good progress, and there's no natural reason why it couldn't be," Ross said in an interview with Bloomberg on Sunday.

Ross called the phase one agreement "particularly complicated" and acknowledged it is "always possible" the signing of the deal could "slip a little bit."

In the interview, Ross also said licenses for U.S. firms to sell components to China's Huawei Technologies would be coming "very shortly."

The comments from Ross come after a report from China's Xinhua News Agency last Friday said U.S. and Chinese trade negotiators have "reached consensus on principles."

President Donald Trump has also continued to express optimism about a trade deal, recently suggesting phase one of an agreement could be signed somewhere in the U.S. as soon as this month.

Trading on Tuesday may be impacted by reaction to reports on the U.S. trade deficit and service sector activity, although any developments on the trade front are likely to steal the spotlight.

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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