September 24, 2019 / 6:48 PM / 2 months ago

TREASURIES-U.S. yields fall as data, Trump comments on China weigh

 (Recasts, adds new comments, U.S. two-year auction results,
updates prices)
    * U.S. consumer confidence falls, pulls yields lower
    * Trump says won't accept bad trade deal with China
    * Trump impeachment call grows, pressures stocks
    * U.S. two-year note auction was well-received by investors

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 24 (Reuters) - U.S. Treasury yields fell to
two-week lows on Tuesday, as risk appetite continued to fade
after weak consumer confidence data and President Donald Trump's
sharp comments on China amid the two countries' trade
negotiations.
    The decline in yields came after a recent rise that took
benchmark U.S. 10-year yields to a five-week high near 2.0%. The
U.S. 10-year note and 30-year bond yields slid for a seventh
straight session on Tuesday, while those on two-year notes have
dropped for four consecutive days. 
    U.S. yields extended their decline after data showed a drop 
in consumer confidence in September to a reading of 125.1, from
a downwardly revised 134.2 in August as persistent trade
tensions worried consumers, possibly weighing on their spending.

    At the same time, Trump kept trade tensions with China
boiling on Tuesday, saying at the United Nations General
Assembly that he would not accept a "bad deal" in trade
negotiations with the world's second largest economy.

    "The day's first major surprise was the 10-point decline in
Conference Board's consumer confidence, the largest monthly
percentage decline that indicator since late 2013," said Jim
Vogel, senior rates strategist at FTN Financial in Memphis,
Tennessee.
    "Next, the president's recycled rhetoric at the UN targeting
China on trade deflated some optimism momentum into the next
round of scheduled U.S.-China talks," he added. 
    Further adding to risk aversion in the market is the growing
call for Trump's impeachment, as he confirmed he had withheld
nearly $400 million in U.S. aid to Ukraine. Trump denied,
however, that he did so as leverage to get its the Ukrainian
president to initiate an investigation that would damage
Democratic political rival Joe Biden.
    In afternoon trading, U.S. 10-year note yields
fell to 1.662% from 1.708% late on Monday, after earlier
touching a two-week low of 1.642%.
    Yields on 30-year bonds were also lower at
2.113%, from 2.153% on Monday. Earlier in the global session,
30-year yields dropped to two-week toughs of 2.097%.
    U.S. two-year yields were down at 1.636%, from
Monday's 1.669%, hitting a two-week low of 1.611% earlier.
    The Treasury's two-year note auction was well-received. The
offering stopped at 1.612%, lower than the expected yield at the
bid deadline. 
    Indirect bidders, which include foreign central banks, took
57.0%, also much better than August's 47.1% and the 47.0%
average. Tuesday's auction was strongest take down by indirect
buyers since January 2018. 
     "Revived worries over trade, geopolitics, and growth, not
to mention the drop on Wall Street amid impeachment talk, may
have supported a safety bid, even as the market richened," said
Action Economics in its blog right after auction. 
    
      September 24 Tuesday 2:29PM New York / 1829 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.9          1.9411    -0.005
 Six-month bills               1.8675       1.9168    0.000
 Two-year note                 99-190/256   1.636     -0.033
 Three-year note               99-212/256   1.5594    -0.041
 Five-year note                98-160/256   1.5406    -0.041
 Seven-year note               98-128/256   1.6045    -0.044
 10-year note                  99-172/256   1.6611    -0.047
 30-year bond                  103          2.114     -0.039
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -2.00        -1.00    
 spread                                               
 U.S. 3-year dollar swap        -3.50        -0.75    
 spread                                               
 U.S. 5-year dollar swap        -7.00        -1.25    
 spread                                               
 U.S. 10-year dollar swap      -13.00        -0.75    
 spread                                               
 U.S. 30-year dollar swap      -43.25        -0.75    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler
and Tom Brown)
  
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