November 6, 2019 / 3:00 PM / 9 days ago

TREASURIES-Bond selloff pauses, U.S.-China trade deal in focus

    * Treasury prices gain after three days of selling 
    * U.S. worker productivity fell in third quarter
    * Treasury to sell $27 bln 10-year notes

    By Karen Brettell
    NEW YORK, Nov 6 (Reuters) - Benchmark U.S. Treasury prices
gained on Wednesday, following a three-day selloff, as investors
waited on further signals that the United States and China will
reach a deal to de-escalate their trade war.
    Bonds have weakened on optimism about a U.S.-China trade
deal, and after data on Friday showed that job growth slowed
less than expected in October while wages rose.             
    The United States and China are working to narrow their
differences enough to sign a "phase one" trade deal as early as
this month, but it’s still unsure where they will sign it.
            
    A stronger-than-expected service sector report on Tuesday
added to the view that the U.S. economy is solid, and that the
Federal Reserve is unlikely to continue cutting rates in the
near-term, after making three rate reductions this year.
            
    Data on Wednesday, however, showed that American workers
were unexpectedly less productive during the third quarter, with
growth in their output failing to keep up with hours worked.             
    “That was a bad number,” said Mary Ann Hurley, vice
president in fixed income trading at D.A. Davidson in Seattle.
    After three days of losses, bonds are also likely being
supported by investor repositioning.
    “We have been down quite a number of days in a row and there
is maybe a little bit of short covering going on here,” Hurley
said.
    Benchmark 10-year notes             gained 12/32 in price to
yield 1.825%, down from 1.865% late Tuesday. The notes have
technical support at around 1.85%.
    The yield curve between two-year and 10-year notes
               flattened to 22 basis points after reaching 24
basis points overnight, which was the steepest since July 24.
    The Treasury Department will sell $27 billion in 10-year
notes on Wednesday, the second offering in the sale of $84
billion in new coupon-bearing supply this week. 
    The government sold $38 billion in three-year notes on
Tuesday to solid demand.             
    It will also sell $19 billion of 30-year bonds on Thursday.
            

    

 (Reporting by Karen Brettell; Editing by Andrea Ricci)
  
 
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