August 7, 2019 / 6:19 PM / 4 months ago

TREASURIES-Recession fears hammer U.S. 30-year yields to near record low

    * Soft demand hits U.S. $27 billion 10-year note sale  
    * Rate cuts by Asian central bank spur more bond buying
    * Fed's Evans signals support for lower U.S. rates
    * Long-dated German yields fall to record lows

 (Updates market action, adds quote, graphics)
    By Richard Leong
    NEW YORK, Aug 7 (Reuters) - U.S. Treasury yields tumbled on
Wednesday, with 30-year yields approaching record lows, on
growing fears over a global economic downturn and bets the
Federal Reserve would have to pick up its pace of interest rate
cuts to counter growing recession risks.
    A closely watched U.S. recession indicator, the premium on
three-month Treasury bill rates over 10-year Treasury yields
elevated to its highest level since March 2007. 
    Bond yields fell around the world with German yields hitting
record lows in negative territory. That came in the wake of 
several Asian central banks lowering their key interest rates to
address growth concerns stemming from the escalating trade war
between China and United States.
    Rate cuts in New Zealand, India and Thailand touched off a
flood of buying of longer-dated bonds in Asia, which persisted
into European and U.S. trading, analysts said.
    "The delivery of rate cuts from central banks overseas added
fuel to the rally," said Jonathan Cohn, interest rate strategist
at Credit Suisse in New York.
    However, investor demand at a $27 billion of 10-year
government notes turned out softer than expected
as their yields were sold at the lowest in three years.

    The 10-year note sale is part of this week's $84 billion
quarterly refunding which is expected to raise $26.7 billion in
cash for new federal spending.   
    On the open market, the yields on benchmark 10-year notes
 were 6.20 basis points lower at 1.677%. They had
fallen earlier to 1.595%, the lowest since October 2016.
    The prices on 30-year or long bonds were at one point were
up as much as 3 points, for a sixth day of gains.
    Thirty-year yields were down 8.10 basis points
at 2.189% after it hit 2.123% earlier, which was not far from an
all-time low of 2.089% set in July 2016, according to Refinitiv
data.
    U.S. yields backed away from their earlier lows on the soft
10-year auction and Wall Street paring its initial losses.

    Interest rates futures suggested traders are building bets
the Fed would cut interest rates three more times by year-end to
avert a recession.
    Chicago Fed President Charles Evans signaled on Wednesday he
was open for lower interest rates to bolster inflation and risks
to economic growth from trade tensions.
    "The bond market is saying the Fed is keeping policy rates
too high," said John Briggs, head of strategy, Americas at
NatWest Markets in Stamford, Connecticut.
    Investors' anxiety about a recession was underscored by the
inversion between three-month bills and 10-year yields, which 
deepened to 39 basis points, a level not seen since March 2007.
It was last at 34 basis points.
   Wednesday, Aug. 7 at 1400 EDT (1800 GMT):
                               Price                  
 US T BONDS SEP9               162-14/32    46/32     
 10YR TNotes SEP9              130-56/256   15/32     
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.9725       2.0099    -0.039
 Six-month bills               1.8925       1.9426    -0.059
 Two-year note                 100-92/256   1.5647    -0.046
 Three-year note               100-2/256    1.4973    -0.054
 Five-year note                101-58/256   1.4934    -0.053
 Seven-year note               101-244/256  1.5783    -0.054
 10-year note                  106-72/256   1.6752    -0.064
 30-year bond                  115          2.1867    -0.083
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       10.80        -0.70     
 30-year vs 5-year yield       69.20        -2.50     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -1.25        -1.00    
 spread                                               
 U.S. 3-year dollar swap        -4.25        -0.50    
 spread                                               
 U.S. 5-year dollar swap        -7.75        -2.00    
 spread                                               
 U.S. 10-year dollar swap      -12.50        -2.25    
 spread                                               
 U.S. 30-year dollar swap      -40.75        -1.50    
 spread                                               
 
  

    
 (Reporting by Richard Leong; Editing by Bernadette Baum and
Nick Zieminski)
  
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below