December 21, 2018 / 2:15 PM / 6 months ago

TREASURIES-Bonds steady as threat of govt shutdown hurts risk appetite

    * Govt. shutdown threat boosts safety demand for bonds
    * Year-end demand supports bond prices

    By Karen Brettell
    NEW YORK, Dec 21 (Reuters) - U.S. Treasuries were steady on
Friday as U.S. President Donald Trump threatened a “very long”
government shutdown and investors were reluctant to hold risky
assets before the weekend.
    Trump called on the Senate to pass spending legislation that
includes his $5 billion demand for border wall funding.
    The Republican-led Senate had already approved funds for the
government through Feb. 8 without money for the wall. But Trump
pushed Republican allies in the House of Representatives on
Thursday to use the short-term funding bill as leverage to force
through the border wall money despite Democratic objections.
            
    “Markets are generally de-risking before the weekend. The
extra uncertainty caused by the threat of a shutdown is
certainly not helping,” said Gennadiy Goldberg, an interest rate
strategist at TD Securities in New York.
    Bonds have rallied since the Federal Reserve on Wednesday
struck a more dovish tone than in its previous meetings but
pledged to keep withdrawing support from an economy it views as
strong.             
    Some investors had expected the Fed would indicate that
further rate increases would be more data dependent as tumbling
stock markets and slowing international growth raises concerns
that the U.S. economy could also face weakness.
    “They were dovish, (but) they were not dovish enough for
markets liking,” said Goldberg.
    Stock markets fell on the Fed statement, which increased
demand for low-risk U.S. government debt.
    Data on Friday showed that the U.S. economy slowed in the
third quarter a bit more than previously estimated, but the pace
was likely strong enough to keep growth on track to hit the
Trump administration's 3 percent target this year.             
    Bonds have also benefited this week from year-end demand
from fund managers rebalancing portfolios. 
    Benchmark 10-year yields             were steady on the day
to yield 2.792 percent. The yields fell to a more than
eight-month low of 2.748 percent on Thursday and have fallen
from a seven-year high of 3.261 percent on Oct. 9.

 (Reporting by Karen Brettell; editing by Jonathan Oatis)
  
 
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