April 9, 2018 / 8:07 PM / 7 months ago

TREASURIES-U.S. 10-yr yield rises as Trump expresses optimism on China tension

    * U.S. tries to appease China on trade dispute
    * Risk appetite improves
    * Focus on China forum later in the session
    * U.S. Treasury auction also weighs on prices

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 9 (Reuters) - U.S. Treasury yields on most
maturities edged higher on Monday, for the fourth time in the
last five sessions, as a recovery of risk appetite accompanied a
rally on Wall Street after the United States sought to ease
concerns about a trade conflict with China.
    The gains in yield, however, were not that significant given
the rise in U.S. equities and analysts said this reflected
persistent uncertainty between the United States and China on
proposed trade tariffs.
    "Just by the fact that stocks were so strong, I would have
expected the yields on the long end to be even higher," said Lou
Brien, market strategist, at DRW Trading in Chicago.
    "I think there is still a lot of uncertainty and that
generally puts a bid to the Treasury market."
    Brien cited the Boao Asia forum later this evening in which
China's President Xi Jinping will give the keynote address. The
Boao Forum is the equivalent of the Davos World Economic Forum,
he added.
    "In light of the trade tensions with the U.S., this is a
highly anticipated speech. And that may have prevented
Treasuries from having a big selloff today," Brien said.
    Earlier, the Trump administration sought to minimize the
ongoing trade dispute with China.
    President Donald Trump in Twitter posts on Sunday referred
to his personal relationship with Chinese President Xi Jinping
and said the two men would always be friends, adding, "Great
future for both countries!"
    Trump's chief economic adviser, National Economic Council
Director Larry Kudlow, also tried to minimize fears of a trade
war. In an interview on CNN's State of the Union show on Sunday,
Kudlow said: "This process might turn out to be very benign."
    The auction of $64 billion in Treasuries this week has also
weighed on prices, which move inversely to yields. Traders
typically sell Treasuries to push up the yield so they can buy
it at a lower price at the auction in a practice known as
"concession."
    "The move higher in rates appears to have stabilized over
the past several weeks as the Fed appears intent on maintaining
a gradual pace of rate hikes," said Gennadiy Goldberg, interest
rates strategist at TD Securities in New York.
    "This relative stability should draw in additional buyers,
though much will depend on whether yields are at the top or
bottom of the range going into the auctions."
    In late trading, U.S. 10-year yields rose to 2.782 percent
, from 2.775 percent late on Friday.
    U.S. 30-year yields, however, slipped to 3.015 percent
, from Friday's 3.017 percent.
    
      April 9 Monday 3:35PM New York / 1935 GMT
                               Price                  
 US T BONDS JUN8               146-4/32     0-3/32    
 10YR TNotes JUN8              120-240/256  -0-20/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.685        1.7153    -0.005
 Six-month bills               1.8675       1.911     0.010
 Two-year note                 99-240/256   2.2824    0.008
 Three-year note               99-226/256   2.4164    0.014
 Five-year note                99-140/256   2.5976    0.011
 Seven-year note               99-108/256   2.7165    0.007
 10-year note                  99-188/256   2.7808    0.006
 30-year bond                  99-184/256   3.0142    -0.003
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        30.75        -0.50    
 spread                                               
 U.S. 3-year dollar swap        25.00        -1.00    
 spread                                               
 U.S. 5-year dollar swap        13.00        -0.75    
 spread                                               
 U.S. 10-year dollar swap        2.00        -0.75    
 spread                                               
 U.S. 30-year dollar swap      -16.25         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)
  
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