January 10, 2019 / 2:28 PM / 9 months ago

TREASURIES-Yields fall on trade deal disappointment, curve steepens on dovish Fed

    * Lack of concrete U.S., China trade deal disappoints
    * Fed's Powell speech on Thursday in focus
    * Treasury to sell $16 bln 30-year bonds

    By Karen Brettell
    NEW YORK, Jan 10 (Reuters) - U.S. Treasury yields fell on
Thursday as stocks weakened on disappointment that no specifics
on resolving the U.S.-China trade dispute emerged from three
days of bilateral meetings, while shorter-dated debt
outperformed following Wednesday’s dovish Federal Reserve
meeting minutes.
    U.S. stock futures dipped after China said talks in Beijing
had established a "foundation" to resolve differences but gave
virtually no details on key issues at stake.                  
    The yield curve steepened after minutes from the Fed’s
December meeting, released on Wednesday, showed that a range of
policymakers said they could be patient about future interest
rate increases and a few did not support the central bank's rate
increase that month.             
    “It was definitely a dovish tone to it, which has aided the
front end of the market,” said Justin Lederer, an interest rate
strategist at Cantor Fitzgerald in New York.
    Benchmark 10-year notes             gained 4/32 in price to
yield 2.715 percent, down from 2.728 percent late Wednesday. The
yield curve between two-year and 10-year notes               
steepened to 16 basis points, from 13 basis points early on
    Two-year notes            are the most sensitive to interest
rate policy.
    A dovish chorus of Fed officials on Wednesday also helped
demand for bonds, with policymakers saying they would be
cautious about raising interest rates without getting a better
handle on how growing risks to an otherwise solid U.S. economic
outlook could play out.             
    A speech by Fed Chairman Jerome Powell later on Thursday
will next be evaluated for clues on interest rate policy.
    Longer-dated debt underperformed with the Treasury
Department due to sell $16 billion in 30-year bonds on Thursday,
the final portion of $78 billion in coupon-bearing supply this
    A $24 billion auction of 10-year notes on Wednesday drew
strong demand, following a weak $38 billion sale of three-year
notes on Tuesday.

 (Editing by Steve Orlofsky)
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