Fed Chair Jerome Powell speech in focus

Treasury yields fell on Tuesday, sending a key rate below 4% as investors looked for safety due to simmering U.S.-China trade tensions.

Traders also braced for a a speech by Federal Reserve Chair Jerome Powell, who could offer more insights about future monetary policy decisions.

The 10-year Treasury fell 2.7 basis points to a one-month low of 4.024%, at one point dipping below the key 4% for the first time since early September. The policy-sensitive 2-year Treasury yield was more than 3 basis points lower at 3.489%. The longer maturity 30-year Treasury yield fell 1.5 basis points to 4.618%. Yields, however, all were off their lows of the session.

One basis point is equal to 0.01% and yields and prices move in opposite directions.

The Fed’s Powell is scheduled to deliver remarks at the National Association for Business Economics annual meeting in Philadelphia later in the day.

Markets are also keeping a close watch on the developments concerning the recently renewed trade tensions between U.S. and China.

“We cannot know when the two sides will negotiate a de-escalation. However, the example from earlier this year shows that neither side is willing to sustain a near complete breakdown in trade which the recent measures imply,” Eastspring Investments wrote in a note published Tuesday.

José Torres, senior economist at Interactive Brokers, noted that sentiment improved after signs the White House is moving toward dialogue with Beijing, despite lingering strain over rare earth export controls, with further talks expected around this week’s IMF and World Bank meetings in Washington.

A ceasefire deal in Gaza, which included the release of hostages, added to the relief, Torres wrote in a note. On Monday,  Palestinian militant group Hamas released the first seven surviving Israeli hostages, marking the first stage of a ceasefire deal brokered with the help of U.S. President Donald Trump.