November 21, 2019 / 3:45 PM / 2 months ago

TREASURIES-U.S. yields rise, reversing early losses, on positive trade news

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 21 (Reuters) - U.S. Treasury yields rose on
Thursday after falling for three straight sessions, bolstered by
more positive news on trade negotiations with China and
unwinding most of this week's safe-haven demand. 
    "The market is very sensitive to trade headlines," said Tom
Simons, economist, at Jefferies in New York. "We've had some
negative headlines this week, but today the news was positive."
    The Chinese commerce ministry said on Thursday Beijing will
strive to reach an initial trade agreement with the United
States as both sides keep communication channels open.
    China is willing to work with the United States to resolve
each other's core concerns on the basis of equality and mutual
respect, and will try hard to reach a "phase one" deal, Gao
Feng, spokesman at the ministry, told reporters.
    The news came after a series of headlines earlier this week
that suggested ongoing trade talks were unraveling. 
    Reuters reported on Wednesday negotiations to finalize a
deal may extend into next year as Beijing presses for more
extensive tariff rollbacks and the Trump administration counters
with heightened demands of its own.
    That news came after the U.S. Senate on Tuesday unanimously
passed legislation aimed at protecting human rights in Hong
Kong, which provoked a strong reaction from China and fueled a
safe-haven rally in Treasuries on Tuesday and Wednesday.
    With bond investors focused on trade, Thursday's mixed
economic data had little impact on the Treasury market.
    Initial U.S. weekly jobless claims were unexpectedly
unchanged at a five-month high last week, suggesting some
softening in the labor market.
    Other reports, on the other hand, showed a mild pick up in
factory activity in the mid-Atlantic region this month, but 
manufacturers reported a sharp slowdown in new orders, shipments
and unfilled orders.
    There is more good news in the housing market, with U.S.
home sales increasing more than expected in October and house
prices rising at the fastest pace in more than two years.

    Analysts said Thursday's batch of data seemed to back the
Fed's decision to put rate cuts on hold.
    "That's what happens when the Federal Reserve takes itself
out of the picture when they signaled a pause in rate cuts,"
Jefferies' Simons said, adding that U.S. economic data did not
really matter.
    On Wednesday, the Fed released the minutes of last month's
monetary policy meeting, which showed the Fed deciding to hit
the pause button in its easing cycle following a rate cut at the
    In morning trading, U.S. 10-year note yields
rose to 1.758%, up from Wednesday's 1.738%.
    Yields on 30-year bonds were up  at 2.22%, up
from 2.203% on Wednesday.
    On the short-end of the curve, U.S. two-year yields edged up
to 1.602%, from Wednesday's 1.572%.
    The yield curve steepened on Thursday amid more upbeat trade
news, as investors reversed six straight sessions of flattening.
The spread between the two-year and 10-year note yields widened
to as much as 18.5 basis points.
      November 21 Thursday 10:33 AM New York/1533 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.5375       1.5692    -0.003
 Six-month bills               1.545        1.583     0.005
 Two-year note                 99-210/256   1.5943    0.022
 Three-year note               100-34/256   1.5792    0.019
 Five-year note                99-130/256   1.604     0.020
 Seven-year note               99-144/256   1.692     0.023
 10-year note                  99-236/256   1.7586    0.021
 30-year bond                  103-88/256   2.2216    0.019
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        -2.00        -0.50    
 U.S. 3-year dollar swap        -4.50        -0.25    
 U.S. 5-year dollar swap        -7.00         0.00    
 U.S. 10-year dollar swap      -10.75         0.25    
 U.S. 30-year dollar swap      -38.50         0.50    
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)
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