November 19, 2019 / 3:41 PM / a month ago

TREASURIES-U.S. long yields slide as trade uncertainty persists

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 19 (Reuters) - U.S. long-dated Treasury
yields, which have fallen in five of the last six sessions,
slipped again on Tuesday, with risk appetite weaker overall amid
the persistent uncertainty over U.S.-China trade negotiations.
    U.S. 30-year yields fell to two-week lows, while those on
10-year notes hit a low of 1.795%, matching Monday's two-week
    Bond investors are cautiously optimistic that a trade deal
between the world's two largest economies will get done, but the
delay after what has been a two-year trade war has kept market
participants on the sidelines.
    "The long end is being driven by what is going on in China,"
said Stan Shipley, fixed income strategist at Evercore ISI in
New York.
    "There is cautious optimism in the market. I think most
investment managers are sitting here with returns of 20% in the
U.S. stock market. The last thing they want to do is squander
those returns, so they're being cautious," he added.
    Solid U.S. data showing that homebuilding rebounded in
October and permits for future home construction jumped to a
more than 12-year high had minimal impact on the Treasury
market, with the focus on trade and other factors.
    Amid a trade standoff, the U.S. yield curve continued to
flatten on Tuesday, with the spread between the two-year and
10-year note yields below 20 basis points, the
narrowest in two weeks. The curve has flattened for five 
straight sessions.
    In morning trading, U.S. 10-year note yields
fell to 1.798%, from 1.808% late on Monday.
    Yields on 30-year bonds also slid to two-week
troughs of 2.27% and last changed hands at 2.274%, down from
2.293% Monday.
    On the short-end of the curve, however, U.S. two-year yields
were higher at 1.606%, up from Monday's 1.592%.
    "The Fed has given some hints that they would like to pause.
 There were some pricing in that they could cut rates in
December of January," said Evercore's Shipley. 
    "I think you need to take that out - because a cut is 
unlikely now. That's why we're seeing the short-end yields
higher," he added.
    New York Federal Reserve President John Williams on Tuesday
affirmed the Fed's neutral stance on monetary policy after
cutting interest rates three times this year.
    "I think we have monetary policy in the right place," he 
said during a discussion at a capital markets conference in
Washington. "The economy is right where we would like it to be."

      November 19 Tuesday 10:24AM New York / 1524 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.54         1.5719    -0.002
 Six-month bills               1.54         1.578     0.000
 Two-year note                 99-206/256   1.6022    0.010
 Three-year note               100-18/256   1.6008    0.006
 Five-year note                99-100/256   1.6287    0.004
 Seven-year note               99-96/256    1.7208    -0.005
 10-year note                  99-144/256   1.798     -0.010
 30-year bond                  102-44/256   2.2747    -0.018
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         0.00        -0.75    
 U.S. 3-year dollar swap        -3.50        -0.50    
 U.S. 5-year dollar swap        -5.50        -0.25    
 U.S. 10-year dollar swap      -10.50         0.00    
 U.S. 30-year dollar swap      -39.75         0.50    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)
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