December 28, 2018 / 4:36 PM / 7 months ago

TREASURIES-U.S. yields little changed; 10-year near 8-month lows as Wall Street stays volatile

    * U.S. Treasuries on track for best month in 2-1/2 years 
    * Treasury funds attract most inflows since February 2015 -
    * Pending home sales fall in Nov, Chicago PMI dips in Dec

    By Richard Leong
    NEW YORK, Dec 28 (Reuters) - U.S. Treasury yields were
little changed on Friday with 10-year yields hovering near
eight-month lows as Wall Street remained volatile, with
investors anxious about the economy and turmoil in Washington
including a partial government shutdown.
    The year-end stampede into safe-haven Treasuries has pushed
the $15.5 trillion sector toward its biggest monthly rally in
2-1/2 years, on track to bring it into positive territory for
2018, according to an index compiled by Bloomberg and Barclays.
    "It's been a move in risk reduction. Treasuries have always
served that role. There's a lot of chaos out there," said Jerry
Paul, senior vice president of fixed income at ICON Advisers in
    Wall Street staged a late rally on Thursday. Earlier in the
volatile week, the benchmark S&P 500 index touched a
20-month low. Then on Wednesday, the S&P 500, the Dow Jones
industrial average and Nasdaq logged their
biggest daily jump in nearly a decade.
    In a sign the stock market might stabilize, U.S. fund
investors shifted $5.2 billion into equity mutual funds and ETFs
for the first time in six weeks, according to research service
firm Lipper late on Thursday.
    Investors also added $4.2 billion in to Treasury funds in
the week ended Dec. 26, the most since February 2015, Lipper
data showed.
    Signs of softening business activity and a flat Treasury
yield curve have raised concerns the U.S. economy might enter a
recession in late 2019. Those worries have stoked bets the
Federal Reserve might stop raising interest rates, analysts
    Domestic pending home sales unexpectedly fell by 0.7 percent
in November, while the Chicago Purchasing Management Index
slipped in December.
    Trade tensions between China and the United States have
added to worries about corporate profits and the economy.
    Still some investors reckoned a tight U.S. labor market and
the massive federal tax cut enacted a year ago would provide an
adequate boost for the economy going into 2019.
    "The economy has too much going for it to have a recession,"
said James Sarni, senior portfolio manager with Payden & Rygel
in Los Angeles.
    At 11:16 a.m. (1616 GMT), benchmark 10-year Treasury yields
 were flat at 2.747 percent after touching 2.720
percent on Wednesday, which was the lowest level since April 2.
    Two-year yields retested 2.540 percent earlier
Friday, which was the lowest since July 6. They were marginally
lower at 2.544 percent.   
    As of Thursday, the Treasury sector, tracked by Bloomberg
and Barclays, has generated a total return of 1.88 percent in
December, putting on track for its strongest monthly performance
since June 2016 when it produced a 2.21 percent gain.
December 28 Friday 11:17AM New York / 1617 GMT
 US T BONDS MAR9               145-13/32    -4/32     
 10YR TNotes MAR9              121-144/256  1/32      
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             2.3625       2.4091    -0.001
 Six-month bills               2.41         2.4729    -0.026
 Two-year note                 99-234/256   2.5443    -0.004
 Three-year note               100-68/256   2.5309    -0.003
 Five-year note                100-50/256   2.5831    -0.008
 Seven-year note               99-208/256   2.6545    -0.006
 10-year note                  103-64/256   2.7467    0.004
 30-year bond                  106-108/256  3.0459    0.017
         YIELD CURVE           Last (bps)   Net       
 10-year vs 2-year yield       20.10        -0.20     
 30-year vs 5-year yield       46.20        2.40      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        13.25        -0.50    
 U.S. 3-year dollar swap         9.25        -0.25    
 U.S. 5-year dollar swap         5.00         0.50    
 U.S. 10-year dollar swap        2.00         0.25    
 U.S. 30-year dollar swap      -16.75         0.25    
 (Reporting by Richard Leong; Editing by David Gregorio)
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