September 17, 2018 / 6:44 PM / 3 months ago

TREASURIES-U.S. long-dated yields slip from highs, global uncertainty weighs

    * Investors take advantage of depressed bond prices, buy
back debt
    * Global trade issues remain a concern
    * White House's Kudlow says U.S. ready to talk to China on
trade
    * Market continues to price in multiple hikes in 2018, 2019

 (Recasts, adds comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 17 (Reuters) - U.S. long-term Treasury yields
slipped from four-month highs to trade little changed to
slightly lower on Monday, as investors returned to buy
government debt after hitting key technical levels as global
uncertainty on trade persisted.
    Earlier in the session, yields on 10-year notes touched
3.022 percent, the highest level since late May. U.S. 30-year
yields also hit a four-month peak earlier of 3.159 percent,
while 2-year yields soared to 2.799 percent, the strongest level
in 10 years.
    But U.S. yields came off their highs by midday trading.
    "A four-month high, a 3 percent yield: that brought in some
buyers," said Kim Rupert, managing director of global fixed
income at Action Economics in San Francisco.
    "That 3 percent yield on the 10-year has been a tough nut to
crack and that's still the case and there's still enough global
uncertainty especially with trade issues," she added.
    White House economic adviser Larry Kudlow said on Monday the
United States is ready to negotiate a trade deal with China
whenever Beijing is prepared for serious talks that will reduce
tariffs and eliminate non-tariff trade barriers
    But China's economic reforms were moving in the wrong
direction and he expected the United States would soon announce
tariffs on an additional $200 billion worth of Chinese goods,
Kudlow said at the Economic Club of New York.
    In afternoon trading, U.S. 10-year yields were last at 2.995
 percent, little changed from the 2.994 percent late
on Friday.
    U.S. 30-year yields were at 3.130 percent, from
Friday's 3.132 percent.
    On the short end, U.S. 2-year yields last traded at 2.782
percent, unchanged from last Friday.
    Yields had risen earlier on Monday amid growing expectations
the Federal Reserve could raise rates a few more times this year
after recent data showed wages spiking last month, elevating
concerns about inflation.
    "There has been continued sentiment that the Fed will
continue to hike rates until December because of stronger wages
and more concern about inflation," said Lou Brien, market
strategist at DRW Trading in Chicago. 
    Data showed U.S. wages in August posted their largest annual
increase in more than nine years, rising 0.4 percent and lifting
the annual increase in wages to 2.9 percent in August, the
largest gain since June 2009.
    The Fed's recent rhetoric has also turned hawkish, analysts
said.
    "We've been tracking a nuanced shift in Fed communication
where FOMC (Federal Open Market Committee) members who
previously leaned dovish in their communication are growing some
talons and are not only signaling hawkish intentions, but
knowingly doing so without an anticipation of upside inflation
risk," said BMO Capital Markets in a research note on Monday. 
    
      September 17 Monday 2:28PM New York / 1828 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.115        2.1553    0.002
 Six-month bills               2.28         2.3379    0.003
 Two-year note                 99-178/256   2.7862    0.004
 Three-year note               99-182/256   2.8514    0.000
 Five-year note                99-80/256    2.8999    0.002
 Seven-year note               98-172/256   2.9627    0.005
 10-year note                  98-244/256   2.9977    0.004
 30-year bond                  97-104/256   3.1342    0.002
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        16.75        -0.50    
 spread                                               
 U.S. 3-year dollar swap        15.50        -0.25    
 spread                                               
 U.S. 5-year dollar swap        12.00        -0.25    
 spread                                               
 U.S. 10-year dollar swap        6.25        -0.25    
 spread                                               
 U.S. 30-year dollar swap       -6.50         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Andrea Ricci and Susan Thomas)
  
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