November 18, 2019 / 3:24 PM / 19 days ago

TREASURIES-U.S. long-dated yields drop to two-week lows on trade uncertainty

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 18 (Reuters) - U.S. long-dated Treasury yields
fell to two-week lows on Monday, after a report triggered fresh
doubts about a trade deal between the United States and China.
    Citing a government source, CNBC reported on Monday that
Beijing was pessimistic about a trade deal with the United
States, troubled by President Donald Trump's comments that there
was no agreement on phasing out tariffs.
    "There was a big response to the CNBC tweet on China," said
Jim Vogel, senior rates strategist at FTN Financial in Memphis,
Tennessee. 
    "The move was on moderately light volume and it was on the
idea that there is really no data to depress yields this week.
So the reaction to anything by anybody in terms of China trade
talks is going to be exaggerated, but it's going to be fast, and
it's going to be definitive," he added. 
    The United States and China have been gnarled in bouts of
tit-for-tat tariffs that have shaken financial markets and
threaten to undermine growth in the global economy.
    Last week, White House economic adviser Larry Kudlow, 
citing what he called very constructive talks with Beijing about
ending a 16-month trade war, said the United States and China
are getting close to a trade agreement.
    FTN's Vogel said investors have shown a great deal of
patience and overall are optimistic a trade deal would be done.
    "Until somebody just comes out and says all talks are on
hold, then we're going to continue to move in a range in
Treasuries, with 10-year yields broadly moving in the
1.78%-1.88% range," he added.
    In morning trading, U.S. 10-year note yields
fell to two-week lows of 1.8% and was last down 1.810%, from
1.734% late on Friday.
    Yields on 30-year bonds also slid to two-week
troughs of 2.282% and last changed hands at 2.286% from 2.311%
on Friday.
    On the short-end of the curve, U.S. two-year yields fell to
1.593%, from Friday's 1.612%.
    The yield curve continued to flatten on Monday amid a
standstill on a U.S.-China trade deal, with the spread between
the U.S. two-year and 10-year note yields compressing to 21.20
basis points. The curve has flattened for four
straight sessions.
    
      November 18 Monday 10:12AM New York/1512 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5375       1.5689    0.000
 Six-month bills               1.5425       1.5802    -0.005
 Two-year note                 99-211/256   1.5919    -0.020
 Three-year note               100-22/256   1.5954    -0.022
 Five-year note                99-104/256   1.6253    -0.027
 Seven-year note               99-92/256    1.7232    -0.027
 10-year note                  99-128/256   1.8049    -0.029
 30-year bond                  101-240/256  2.2854    -0.026
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         1.50        -0.25    
 spread                                               
 U.S. 3-year dollar swap        -2.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap        -4.75        -0.50    
 spread                                               
 U.S. 10-year dollar swap      -10.50        -0.75    
 spread                                               
 U.S. 30-year dollar swap      -40.00        -0.75    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)
  
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