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US and China agree to lower trade tariffs during 90-day

pause

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Treasury yields rise amid investor shift to risk assets

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Markets see no Fed rate cut until September

(Updates yields, adds analyst comment)

By Tatiana Bautzer and Amanda Cooper

NEW YORK/LONDON, May 12 (Reuters) - U.S. Treasury yields

rose on Monday to the highest levels in a month after the United

States and China agreed to lower trade tariffs on one another

during a 90-day pause, triggering a rush of investor cash into

risk assets and hitting safe havens like bonds.

The yield on the benchmark U.S. 10-year Treasury note

rose 9 basis points in U.S. trading to 4.465% amid

a strong market rally that pushed stocks and the dollar higher.

The world's two largest economies said in a joint statement

that they had reached a deal to impose a 90-day pause on tariffs

and reciprocal duties would drop sharply, giving investors some

confidence that a full-scale trade war may have been averted.

U.S. Treasury Secretary Scott Bessent, speaking after talks

with Chinese officials in Geneva, told reporters the two sides

had reached the deal that was outlined in a joint statement and

that reciprocal rates would drop by 115 percentage points.

President Donald Trump said at the Oval Office that part of

the deal includes larger acquisitions of U.S. agricultural

products by China.

Tom di Galoma, managing director at Seaport Global Holdings,

said the market reaction is warranted because the announcement

indicates a trade war between China and the U.S. has been

averted.

The 10-year yield is still well above where it was prior to

Trump's April 2 "Liberation Day", when he unveiled a flurry of

tariffs on U.S. trading partners. At that point, 10-year yields

were at 4.15%.

The two-year U.S. Treasury yield, which

typically moves in step with interest rate expectations,

rose 12.1 basis points to 4.004%. "What we are seeing now are

yields rising because of investors' risk-on movement, reversing

what had been happening since Liberation Day. It's still

difficult to understand what the Fed will do and that will be

clearer after some data releases this week", Galoma said.

Markets are predicting rates will not change in June. The

highest odds for the next rate cut, with a 52% chance, are for

the September meeting, according to CME's FedWatch tool.

"It's a step in the right direction and a positive for U.S.

assets and U.S. economy," said Kenneth Broux, senior strategist

FX and rates at Societe Generale. Other investor safe havens

such as the Swiss franc fell.

A closely watched part of the Treasury yield curve measuring

the gap between yields on two- and 10-year Treasury notes

, seen as an indicator of economic expectations,

was at a positive 45.9 basis points, flattening from 48.7 basis

points late Friday.