2018.12.1215:21:00UTC+00Treasuries Extend Pullback Amid Renewed Optimism About U.S.-China Trade Deal

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

Bond prices came under pressure early in the session and remained firmly negative throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.7 basis points to 2.906 percent.

With the continued increase on the day, the ten-year yield climbed further off the more than three-month closing low set last Friday.

Reflecting recent waffling between hopeful and skeptical about a trade deal between with the U.S. and China, traders once again moved toward the more optimistic camp.

The shift came after President Donald Trump expressed optimism about striking a trade deal with Chinese President Xi Jinping in an interview with Reuters on Tuesday.

Trump noted that trade talks between U.S. and Chinese officials were underway by telephone and suggested more meetings are likely.

"We'll probably have another meeting. And maybe a meeting of the top people on both sides," Trump said. "If it's necessary, I'll have another meeting with President Xi, who I like a lot and get along with very well."

Trump also indicated he would be willing to intervene with the Justice Department in the case against Huawei Chief Financial Officer Meng Wanzhou if it would help secure a trade deal with China.

"If I think it's good for the country, if I think it's good for what will be certainly the largest trade deal ever made - which is a very important thing - what's good for national security - I would certainly intervene if I thought it was necessary," Trump said.

Treasuries saw continued weakness following the release of the results of the Treasury Department's auction of $24 billion worth of ten-year notes, which attracted below average demand.

The ten-year note auction drew a high yield of 2.915 percent and a bid-to-cover ratio of 2.35, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.57.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

On the U.S. economic front, the Labor Department released a report showing consumer prices came in flat in the month of November, with a sharp pullback in gasoline prices offsetting increases in other prices.

The Labor Department said its consumer price index was unchanged in November after rising by 0.3 percent in October. The unchanged reading matched economist estimates.

Excluding food and energy prices, core consumer prices edged up by 0.2 percent in November, matching the uptick seen in October as well as expectations.

Developments regarding the U.S.-China trade talks may impact trading on Thursday along with reports on weekly jobless claims and import and export prices.

The Treasury is also due to finish off this week's long-term securities auctions with the sale of $16 billion worth of thirty-year bonds.