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China talks front and center on bond investors' radar

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Trump says 80% tariffs on China imports seem right

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Fed fund futures lower odds of July easing

By Gertrude Chavez-Dreyfuss

NEW YORK, May 9 (Reuters) - U.S. Treasury yields slipped

on Friday, with thinner volume than usual and sentiment still

uncertain, as investors looked ahead to talks between the Trump

administration and China over the weekend in Geneva on tariffs.

There was a bit of short-covering going on in Treasuries

following a selloff on Thursday that pushed yields to multi-week

highs, amid a U.S.-UK trade deal, the first such agreement since

President Donald Trump imposed worldwide tariffs on April 2.

It was a deal that sparked a rally in U.S. equities, and the

dollar, while pushing Treasury prices lower and yields higher,

as investors looked to take on more risk.

Trump said more deals are set to follow the UK trade pact.

Ahead of the China negotiations, Trump said on Friday that

an 80% tariff on Chinese goods "seems right," making his first

suggestion of a specific alternative to the 145% levies he has

imposed on China.

U.S. stock futures briefly dipped after the Trump news,

while the 10-year yield slipped. The U.S. president's comments

did not match earlier speculation, reported by Bloomberg, that

Treasury Secretary Scott Bessent, who is heading the U.S.

delegation, and his group have set a target of reducing tariffs

below 60% as a first step.

Mike Venuto, co-founder and chief investment officer at

Tidal Financial Group in New York, was not optimistic about the

upcoming China talks.

"It will take more time than we want to. I would expect

further uncertainty because trade deals even when you have good

partners which are working in good faith will take a year to

work out," he said.

"What we have seen so far is simply symbolic. There's a lot

of wood to chop. People are just looking for any piece of good

news that is more or less sustainable."

In late morning trading, the benchmark 10-year yield

slid 1.8 basis points (bps) to 4.355%. On Thursday,

following the UK trade deal, the yield hit a two-week high.

U.S. 30-year yields, meanwhile, were little changed at

4.828%.

On the front end of the curve, the two-year yield

, which reflects interest rate expectations, fell 5.2

bps to 3.845%. It hit a three-week peak on Thursday.

Federal Reserve speakers on Friday did not say anything

earth-shattering so far, suggesting that policy remains on hold

for the foreseeable future given tariff uncertainty.

Following the UK trade agreement, the benchmark federal

funds futures market has lowered the odds of a rate cut at the

July 29-30 policy meeting to 62%, from around 70% on Wednesday,

according to LSEG calculations. It also sees about 71 bps of

easing this year, from 82 bps on Wednesday.