April 4, 2019 / 7:26 PM / 2 months ago

TREASURIES-U.S. yields dip as traders await U.S.-China talks progress

    * Traders on edge over latest round of U.S.-China trade
    * U.S. jobless claims fall to 49-year low last week
    * U.S. to sell $78 bln in 3-, 10-, 30-year debt
    * Fed's Mester, Harker not shunning chances of a U.S. rate

 (Updates market action, adds quote, graphic)
    By Richard Leong
    NEW YORK, April 4 (Reuters) - U.S. Treasury yields slipped
modestly on Thursday, below 1-1/2-week highs, as traders awaited
a possible breakthrough in the latest round of trade
negotiations between China and the United States.
    A deal between the world's two biggest economies would
remove a concern that has been hanging over financial markets
since the two nations imposed tariffs on each other last year. 
    President Donald Trump will meet Vice Premier Liu He, who is
leading the Chinese side, in the Oval Office at 4:30 p.m. (2030
GMT), the White House said.
    "It's definitely heading in the right direction," said Eric
Souza, senior portfolio manager at SVB Asset Management in San
    In late U.S. trading, yields on benchmark 10-year Treasury
notes were 2.513%, down marginally from late on
Wednesday. They hit a 1-1/2-week peak of 2.528% in the previous
    Global bond yields have risen this
week on encouraging economic data, in particular from China.
    Data on the United States and Europe, on the other hand,
have been mixed, stoking worries over a global economic
    Earlier Thursday, German industrial orders recorded their
steepest decline in over two years in February, while U.S.
jobless claims fell to a 49-year low last week.

    The U.S. jobs market has remained resilient even as housing,
manufacturing and other areas of the economy have wobbled since
late 2018 due to trade worries and weakening overseas demand.
    The U.S. Labor Department will release its payrolls report
for March at 8:30 a.m. (1230 GMT). 
    Analysts polled by Reuters forecast U.S. employers likely
hired 180,000 workers last month, stronger than the 20,000 they
added in February, with the unemployment holding steady at 3.8%.
    They are also looking for wages to grow a 0.3% clip in
March, a tad slower than the 0.4% pace the month before.
    Meanwhile, Philadelphia Federal Reserve President Patrick
Harker and Cleveland Fed chief Loretta Mester spoke about the
economy at separate events. Neither is a voting member of the
Federal Open Market Committee in 2019.
    Harker said he expected the Fed would "at most" hike
interest rates once in 2019 and once in 2020 if current
conditions remain intact.
    U.S. rates may need to move "a bit higher" if the economy
performs as expected, Mester said.
    On the supply front, the U.S. Treasury Department said it
will sell a combined $78 billion in three-, 10- and 30-year
bonds next week.

    Thursday, April 4, at 1508 EDT (1908 GMT):
 US T BONDS JUN9               147-20/32    4/32      
 10YR TNotes JUN9              123-136/256  1/32      
                               Price        Current   Net
                                            Yield     Change
                                            (pct)     (bps)
 Three-month bills             2.38         2.4277    -0.009
 Six-month bills               2.385        2.4542    0.000
 Two-year note                 99-212/256   2.339     0.006
 Three-year note               100-58/256   2.2947    0.003
 Five-year note                99-24/256    2.3185    -0.001
 Seven-year note               98-248/256   2.4112    -0.005
 10-year note                  100-248/256  2.5133    -0.004
 30-year bond                  101-136/256  2.9227    -0.006
         YIELD CURVE           Last (bps)   Net       
 10-year vs 2-year yield       17.30        -1.15     
 30-year vs 5-year yield       60.40        -0.15     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        10.75        -0.25    
 U.S. 3-year dollar swap         8.00         0.25    
 U.S. 5-year dollar swap         4.00         0.25    
 U.S. 10-year dollar swap       -2.00         0.25    
 U.S. 30-year dollar swap      -25.25         0.50    
 (Reporting by Richard Leong; Editing by Bernadette Baum and
James Dalgleish)
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