August 8, 2019 / 1:50 PM / a month ago

TREASURIES-U.S. bond yields rise as stock markets stabilize

    * Latest 30-year bond seen selling at lowest yield in 3
years
    * U.S. jobless claims unexpectedly fall last week

 (Updates market action, adds table)
    By Richard Leong
    NEW YORK, Aug 8 (Reuters) - U.S. Treasury yields rose on
Thursday, with 30-year yields climbing from a near record low,
as traders scaled back their safe-haven holdings of U.S.
government debt amid a tentative recovery in equity markets. 
    Fears about a global downturn, exacerbated by trade tensions
between China and the United States, sparked a sharp sell-off in
stock markets and stoked a rush into Treasuries, yen, gold and
other perceived safe assets.
    Anxiety that the longest ever U.S. economic expansion is
about to come to end intensified when a closely watched bond
market indicator on recession hit its strongest level since
March 2007.
    Treasury yields were "trading higher this morning, but there
is more 'calm' around today's trading vs. yesterday's 'race to
the bottom' styled trading pattern," said Kevin Giddis, head of
fixed income capital markets at Raymond James.
    U.S. yields began climbing from their recent lows since late
Wednesday when the S&P 500 and Nasdaq eked out slim gains,
recouping steep losses earlier in the day.
    The bounce in yields moved overnight to overseas bond
markets, where German yields moved up from record
lows in response to better-than-expected Chinese trade data and
a steadying of its currency.
    A surprise drop in domestic jobless claims last week also
allayed some fears of a recession.
    At 9:35 a.m. (1335 GMT), the yield on the 30-year or long
bond was up 8.8 basis points at 2.283%. 
    On Wednesday, the 30-year yield fell to 2.123%, within
striking distance of an all-time low of 2.089% set in July 2016,
according to Refinitiv data.
    Benchmark 10-year Treasury yields were 
7.1 basis points higher at 1.762% after hitting 1.595% on
Wednesday, which was their lowest level since October 2016.
    Longer-dated U.S. yields faced additional upward pressure
from this week's debt supply for the government's quarterly
refunding.
    Investor demand for $27 billion in 10-year Treasuries on
Wednesday was softer than expected.
    The Treasury will auction $19 billion of 30-year bonds at 1
p.m. (1700 GMT).
    In "when-issue" trading, traders expect the latest 30-year
bond to sell at a yield of 2.290%, which would
be the lowest yield at a 30-year auction in three years.
    On the short-end of the yield curve, the margin of
three-month T-bill rates over 10-year note yields
shrank to 27 basis points after touching 40 basis points the day
before, which was the highest level in 12-1/2 years.
    An inversion between these two maturities has preceded a
recession in the past 50 years.
    Short-term interest rates futures suggested traders trimmed
bets the Fed would lower key borrowing costs three more times
this year following its first rate-cut since 2008 last week.

August 8 Thursday 9:35AM New York / 1335 GMT
                               Price                  
 US T BONDS SEP9               160-14/32    -57/32    
 10YR TNotes SEP9              129-140/256  -20/32    
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.9875       2.0252    0.004
 Six-month bills               1.91         1.9607    0.018
 Two-year note                 100-65/256   1.6188    0.048
 Three-year note               99-210/256   1.5615    0.056
 Five-year note                100-218/256  1.5714    0.069
 Seven-year note               101-106/256  1.6595    0.074
 10-year note                  98-184/256   1.7653    0.074
 30-year bond                  112-168/256  2.2864    0.091
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       14.30        1.85      
 30-year vs 5-year yield       71.40        1.35      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -1.75         0.50    
 spread                                               
 U.S. 3-year dollar swap        -4.50         0.75    
 spread                                               
 U.S. 5-year dollar swap        -7.50         0.75    
 spread                                               
 U.S. 10-year dollar swap      -12.75         0.25    
 spread                                               
 U.S. 30-year dollar swap      -42.25        -0.50    
 spread                                               
 
    

 (Reporting by Richard Leong; Editing by Bernadette Baum and
Susan Thomas)
  
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