May 10, 2019 / 8:02 PM / 14 days ago

TREASURIES-U.S. bond yields flat as trade jitters diminish

    * Fresh U.S. levies on Chinese goods go into effect
    * U.S., Chinese negotiators ink no trade deal, talks to
continue
    * Trump suggests in tweets tariffs may or may not be removed
    * U.S. CPI rises in April, underlying inflation stays benign

 (Updates market action, adds quote, graphics)
    By Richard Leong
    NEW YORK, May 10 (Reuters) - U.S. Treasury yields were
little changed on Friday, with longer-dated yields hovering at
five-week lows, as worries about trade tension between China and
the United States simmered down even in the absence of a deal
following two-days of negotiations.
    Reduced anxiety about a trade war between the world's two
biggest economies offset mildly disappointing data that showed
domestic inflation rose less than market expectations.
    The United States escalated a tariff war with China on
Friday by raising duties on $200 billion worth of Chinese goods,
and China is expected to retaliate.
    Both sides said the latest round of talks went well enough
for further discussions. 
    President Donald Trump said on Twitter on Friday the new
tariffs on Chinese goods may or may not be removed depending on
future talks.
    Still, doubts persist over an imminent agreement to resolve
the two nations' trade differences.
    "No progress has been made. Now negotiations are going to
Beijing. This seems like they will drag on," said Subadra
Rajappa, head of U.S. rates strategy at SG Corporate &
Investment Banking in New York.   
     In late U.S. trading, benchmark 10-year Treasury yields
 edged up 0.3 basis point to 2.4601%. They fell to a
five-week low of 2.424% on Thursday.
    On the week, 10-year yields fell 7 basis points, the
steepest drop in seven weeks.
    Two-year Treasury yields dipped 1 basis point to
2.2579%, bringing its weekly decline to 8 basis points.
    Wall Street's main index ended higher on the day with the
S&P 500 gaining over 0.4%.
    U.S. bond yields had fallen earlier on Friday in reaction to
a mildly weaker-than-forecast report on U.S. consumer prices.
    The government's consumer price index increased 0.3% in
April, less than the 0.4% increase forecast by analysts polled
by Reuters.
    The latest CPI reading reinforced the notion that the
Federal Reserve would leave key lending rates unchanged this
year, although the futures market still implied traders expect a
60% chance of a rate cut at the end of the year.
    "For the Fed, the disappointment in the April CPI report is
not likely to materially change the clear majority view that
some significant part of recent soft inflation numbers is
transitory," TD Securities analysts wrote in a research note. 
May 10 Friday 3:50PM New York / 1950 GMT
                               Price                  
 US T BONDS JUN9               148-20/32    -2/32     
 10YR TNotes JUN9              123-244/256  -1/32     
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.3775       2.4244    -0.010
 Six-month bills               2.38         2.4418    -0.007
 Two-year note                 99-252/256   2.2579    -0.010
 Three-year note               99-184/256   2.2224    -0.003
 Five-year note                99-250/256   2.2549    0.002
 Seven-year note               100-38/256   2.3517    0.004
 10-year note                  99-64/256    2.4601    0.003
 30-year bond                  99-236/256   2.8789    -0.002
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       19.90        1.65      
 30-year vs 5-year yield       62.20        0.80      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.75         0.25    
 spread                                               
 U.S. 3-year dollar swap         7.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         3.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -25.75         0.25    
 spread                                               
 
    
 (Reporting by Richard Leong; editing by Jonathan Oatis and
Susan Thomas)
  
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