July 1, 2019 / 1:51 PM / 3 months ago

TREASURIES-U.S. bond yields rise on U.S.-China's trade truce

    By Richard Leong
    NEW YORK, July 1 (Reuters) - U.S. Treasury yields rose on
Monday as China and the United States' agreement to restart
trade talks caused investors to pare their safe-haven holdings
of bonds, although the selling was limited by worries about
global economic growth.
    Investors had piled into U.S. government debt and other
perceived low-risk assets on fears about a further escalation in
trade tensions between the world's biggest economies after a G20
summit in Osaka, Japan this weekend.
    But Washington and Beijing agreed to renegotiate after U.S.
President Donald Trump offered concessions, including no new
tariffs and an easing of restrictions on tech company Huawei,
while China approved making unspecified new purchases of U.S.
farm products.
    "What is a truce for now represents to us more sentiment
than anything else," said Gregory Faranello, head of U.S. rates
at AmeriVet Securities. 
    With U.S.-China trade talks seemingly back on track, there
were lowered expectations the Federal Reserve would embark on an
aggressive half a point rate cut at its next policy meeting on
July 30-31, though traders still anticipate a more modest
quarter point decrease, analysts said.
    The view on a possible Fed rate cut was supported by
disappointing factory data in Asia and Europe.
    "The market wants a rate cut," Faranello said. "Bottom line,
this is what we are priced for and the Fed certainly has a role
in current market expectations." 
    At 9:43 a.m. (1343 GMT), benchmark 10-year Treasury yields
 were up 1.20 basis point at 2.012%, while two-year
yields were 2.20 basis points higher at 1.763%.
July 1 Monday 9:42AM EDT/ 1342 GMT
 US T BONDS SEP9               155-15/32    -0-4/32    
 10YR TNotes SEP9              127-232/256  -0-16/256  
                               Price        Current    Net
                                            Yield %    Change
 Three-month bills             2.0725       2.1175     0.018
 Six-month bills               2.055        2.1106     0.016
 Two-year note                 99-190/256   1.7571     0.016
 Three-year note               100-28/256   1.7117     0.014
 Five-year note                99-236/256   1.7664     0.009
 Seven-year note               99-252/256   1.8774     0.009
 10-year note                  103-60/256   2.0119     0.012
 30-year bond                  107-4/256    2.5384     0.012
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
 U.S. 2-year dollar swap         5.50         0.25     
 U.S. 3-year dollar swap         3.75         0.50     
 U.S. 5-year dollar swap         0.25         1.00     
 U.S. 10-year dollar swap       -4.25         0.50     
 U.S. 30-year dollar swap      -31.50         0.50     
 (Reporting by Richard Leong; editing by Jonathan Oatis)
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