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(Bloomberg) -- Optimism the US and China are nearing a trade deal is prompting investors to sell Treasuries as demand for havens wanes.

Yields on 10-year benchmark US government bonds rose as much as four basis points to 4.04%, the highest in more than a week, after negotiators from the world’s two biggest economies said they’d struck a series of agreements on issues including tariffs and export controls. Yields on five- and two-year notes rose three basis points as improving risk sentiment overshadowed expectations of a Federal Reserve interest-rate cut this week.

“Treasuries are falling as investors unwind the ‘seek havens at all cost’ narrative when the US-China trade relationship went pear-shaped,” said Anna Wu, cross-asset investment strategist at VanEck Australia. “Yields may stay range-bound until further US-China talks, though, and any major fallout will cause knee-jerk buying again.”

The selloff comes at the start of a blockbuster week for markets as traders brace for a bevy of central bank policy decisions and the outcome of President Donald Trump’s meeting with his Chinese counterpart Xi Jinping. Selling pressure on Treasuries might reverse quickly should talks stall or central banks surprise on rates, paving the way for a volatile week of macro trading.

Two- and five-year Treasury sales later on Monday will offer another read on investor sentiment.

Ella Hoxha, head of fixed income at BNY Investments Newton, said yields can stabilize around current levels given soft CPI data on Friday and concern over pockets of the US economy, such as housing and private credit. However, risk premiums look insufficient given growing inflation risks ahead as tariffs start to have a bigger impact.

“We’re erring more on the side of caution,” Hoxha said in an interview with Bloomberg TV. “For the time being, you can still continue with this benign price action in Treasuries, but I think into 2026 the story might change.”

A proxy for term premium on US 10-year debt — the extra yield investors demand to part with their money for longer, which also signals their perception of future risk about factors including inflation — rose one basis point to 66 basis points, after falling to a six-month low last week.

A US government shutdown that is now the second-longest in history is also depriving investors of key economic data points, adding to risks of current rates positions. Investors are betting on pending Fed cuts, with overnight-indexed swaps indicating the US central bank will almost certainly lower benchmark rates this week and in December.

Rate-Cut Bets Locked, Treasuries Traders Focus on Fed Signals

What Bloomberg Strategists Say...

“Treasuries may fall less than most peers with the Fed set to cut rates and end QT, and the US government shutdown dragging on.”

Garfield Reynolds, Markets Live strategist

Market participants are focusing on what they are able to monitor for now though, with a positive outlook on trade a clear theme.

“It’s a risk-on factor,” Hidehiro Joke, a senior bond strategist at Mizuho Securities in Tokyo, said of trade talks. “Treasuries are experiencing some mild selling.”

--With assistance from James Hirai and Alice Gledhill.

(Updates prices, adds investor comment.)