October 16, 2019 / 1:25 PM / 2 months ago

TREASURIES-Yields fall on disappointing retail sales data

    * Retail sales fall for first time in seven months
    * Conflicting Brexit reports causes chopping trading

    By Karen Brettell
    NEW YORK, Oct 16 (Reuters) - U.S. Treasury yields fell on
Wednesday after data showed that U.S. retail sales fell for the
fist time in seven months in September, adding to concerns that
the U.S. economy is slowing.
    The Commerce Department said retail sales dropped 0.3% last
month, the first drop since February, as households cut spending
on motor vehicles, building materials, hobbies and online
purchases.
    “The retail sales figures were pretty disappointing across
the board,” said Benjamin Jeffery, a rates strategist at BMO
Capital Markets in New York.
    The Federal Reserve is expected to cut rates when it meets
on Oct. 29-30, though Fed policymakers are divided on whether
further cuts are needed.
    The weak data offset hopes that Britain would reach a deal
with the European Union to avoid a disorderly Brexit.
    Earlier, yields rose on a report that the main stumbling
block to a deal had been removed, with Northern Ireland’s
Democratic Unionist Party (DUP) accepting the latest proposal.

    “Going into the retail sales data there was a bit of a
selloff in rates just due to some of the headlines coming in
around Brexit optimism,” Jeffery said.
    The DUP responded, however, that sources behind the claim
were talking nonsense.
    Benchmark 10-year yields fell to 1.741%, after
rising as high as 1.778% on Tuesday, the highest since September
20.
    Investors are also focused on the likelihood that the United
States and China will reach a deal to end their trade war, which
has been blamed for harming global growth.
    The U.S. House of Representatives on Tuesday passed four
pieces of legislation taking a hard line on China, three related
to pro-democracy protests in Hong Kong and one commending Canada
in its dispute over the extradition of a Chinese telecom
executive, a move that is seen as inflaming tensions between the
two counties.
    China's foreign ministry accused the U.S. lawmakers of
"sinister intentions" to undermine Hong Kong's stability and
warned that bilateral relations would be damaged should the
measures become law. 
    
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.64         1.6743    -0.003
 Six-month bills               1.61         1.6503    -0.013
 Two-year note                 99-215/256   1.5835    -0.038
 Three-year note               99-116/256   1.5626    -0.040
 Five-year note                99-182/256   1.5608    -0.036
 Seven-year note               99-220/256   1.6464    -0.034
 10-year note                  98-244/256   1.7413    -0.028
 30-year bond                  100-132/256  2.2262    -0.004
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         4.50         0.25    
 spread                                               
 U.S. 3-year dollar swap         1.25         0.00    
 spread                                               
 U.S. 5-year dollar swap        -1.00        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -8.25        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -38.75        -1.25    
 spread                                               
 
 (Editing by David Gregorio)
  
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