August 13, 2019 / 2:29 PM / 9 days ago

REFILE-TREASURIES-U.S. yields rise on renewed optimism about China trade talks

 (Insert dropped word "from" in last bullet)
    * U.S. says some products to be removed from China tariff
list
    * China a says spoke with U.S. trade officials
    * U.S. CPI rises in July
    * U.S. 30-year yields rise from 3-year low

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 13 (Reuters) - U.S. Treasury yields rose on
Tuesday, as risk appetite improved after U.S. Trade
Representative Robert Lighthizer said some products will be
removed from China's tariff list, easing  trade tensions between
the two world's largest economies for now. 
    U.S. 10-year note yields hit session highs, while those on
30-year bonds rallied from more than three-year lows. Traders
earlier were bracing for 30-year yields sinking to a record low
below 2.08%.
    Lighthizer said the products to be removed from China's
tariff list will be based on health, safety, national security
and other factors. These items will not face additional tariffs
of 10%.. 
    The trade representative's comments came after Chinese Vice
Premier Liu conducted a phone call with U.S. trade officials,
according to a statement from the China's Ministry of Commerce.

    "We got this trade headlines and we saw equities jump 400
points and that's led to some Treasury selling. So it's overall
trade optimism for global markets," said Justin Lederer,
Treasury trader, at Cantor Fitzgerald in New York.
    That said market sentiment remained cautious overall.
    Tuesday's data showing a pick-up in U.S. inflation in July
earlier pushed yields slightly higher. Analysts said the higher
inflation was a positive sign for the U.S. economy, but was
likely not enough to deter the Federal Reserve from cutting 
interest rates at the next policy meeting in September.
    The Labor Department said on Tuesday the U.S. consumer price
index climbed 0.3% last month, lifted by gains in the cost of
energy products and a range of other goods. Excluding the
volatile food and energy components, the CPI gained 0.3% after
rising by the same margin in June.
    "I really think we need to see a string of stronger
inflation in data before we see a mutual change in sentiment
that is very focused on backward-looking inflation and recent
data showing that inflation is nowhere to be found in Europe and
Japan and it's sluggish in the U.S.," said Bill Merz, director
of fixed income at U.S. Bank Wealth Management in Minneapolis.
    In morning trading, U.S. benchmark 10-year Treasury note
yields rose to 1.686% from 1.64% late on Monday.
    Yields on 30-year bonds advanced to 2.143%, from
2.13% on Monday. Thirty-year yields earlier hit 2.097%, their
lowest level since July 2016.
    At the short end of the curve, U.S. two-year yields rose to
1.652% from Monday's 1.58%.
    
      August 13 Tuesday 10:14AM New York / 1414 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.9675       2.0104    0.013
 Six-month bills               1.9025       1.953     0.018
 Two-year note                 100-51/256   1.6463    0.066
 Three-year note               99-194/256   1.583     0.075
 Five-year note                100-230/256  1.5611    0.076
 Seven-year note               101-160/256  1.6271    0.070
 10-year note                  99-100/256   1.6915    0.051
 30-year bond                  102-12/256   2.157     0.027
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -1.50        -0.25    
 spread                                               
 U.S. 3-year dollar swap        -3.75         0.00    
 spread                                               
 U.S. 5-year dollar swap        -6.75         0.00    
 spread                                               
 U.S. 10-year dollar swap      -10.75         0.50    
 spread                                               
 U.S. 30-year dollar swap      -39.00         0.75    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve
Orlofsky)
  
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