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Treasury yields climb, adding to September rebound on trade war optimism

U.S. government debt yields rose on Monday as gradual de-escalation of trade relations between the U.S. and China continued to ease investor angst.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, rose 8 basis points higher at 1.634%, while the yield on the 30-year Treasury bond climbed 9 basis points to 2.11%.

The latest turn away from Treasurys came after Politico reported on Friday that China made a peace proposal in a phone conversation with top trade officials last week to buy an unspecified quantity of U.S. agricultural goods.

The report, citing people familiar with the talk, said the offer could hinge on whether the U.S. eases export restrictions on Chinese telecom giant Huawei and postponing the Oct. 1 round of tariffs.

The latest report on the U.S.-China trade war came just weeks after President Donald Trump delayed some tariffs on Chinese imports ahead of the Christmas shopping season to Dec. 15. Trump had announced in early August that the administration would impose 10% tariffs on the remaining $300 billion worth of Chinese goods that at the time had not yet been subject to the duties.

The White House has already imposed tariffs on $250 billion worth of imports from China. For its part, Beijing had already put retaliatory tariffs on $110 billion worth of U.S. goods and responded to the most recent threat by suspending all purchases of U.S. agricultural products.

New data out of China showed that exports unexpectedly fell in August with a large contraction for shipments to the United States. The drop indicates further weakness in the world's second largest economy and puts further pressure on Chinese lawmakers to announce new economic stimulus.

Market sentiment is also somewhat cautious on the back of a disappointing U.S. jobs report at the end of last week.

U.S. employers added a fewer-than-anticipated 130,000 jobs in August, the government said in its regular update situation on Friday. Economists polled by Dow Jones expected the labor market to add 150,000 jobs following a gain of 164,000 in July. The unemployment rate held steady at 3.7%.

Average hourly earnings — a statistic often used by economists as a leading inflation indicator — rose more than expected between August and July, as a 0.4% gain topped expectations of a 0.3% increase. The print brings wages gains up to 3.2% over the year.

U.S. Markets Overview: Treasurys chart