July 29, 2019 / 2:22 PM / 25 days ago

TREASURIES-U.S. yields fall as markets await Fed decision

    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 29 (Reuters) - U.S. Treasury yields were
lower across the board on Monday, in line with falls around the
world amid global economic uncertainty, as investors await a
widely expected interest rate cut by the Federal Reserve this
week.
    The Fed begins its two-day monetary policy meeting on
Tuesday, with a 25-basis-point cut fully priced in.
    "People say the Fed could go 50 basis points, but I think
that's not going to happen," said Stan Shipley, fixed income
strategist at Evercore ISI in New York. "The question is what
they are going to say about future cuts."
    U.S. Treasuries also tracked core euro zone government bond
yields, which traded just above record lows hit last week after
the European Central Bank last Thursday flagged another round of
easing.
    Mounting concerns for a "no deal" Brexit and general growth
worries are increasing the odds for decisive action from the
European Central Bank. 
    Treasuries also moved with UK 10-year yields, which dropped
to the lowest in almost three years.
    In morning trading, U.S. 10-year note yields fell to 2.056%
, from 2.081% late on Friday.
    Yields on 30-year bonds slid to 2.583%, from
2.601% on Friday.
    At the short end of the curve, two-year yields slipped to
1.843%, from Friday's 1.87%.
    With a Fed cut factored in, investors will focus on the
Fed's statement, which should hint at its guidance on future
cuts.
    "Offering forward guidance to indicate there will be
additional accommodation is precisely the tact (Fed Chair
Jerome) Powell will need to employ to offset the risk of a
post-cut disappointment downtrade," BMO Capital Markets said in
a research note. "His success in crafting the message
effectively without over-committing remains to be seen."
    Aside from the Fed decision, this week is heavy in terms of
economic data, headlined by Thursday's U.S. manufacturing report
and Friday's non-farm payrolls report.
    Analysts said the U.S. economy seems to be on a more solid
footing than the rest of the world, but global sentiment has
been tainted nonetheless.
    "Globally, business sentiment is falling. The labor market
looks fine in the U.S., consumer spending is fine, but people
are getting worried about business sentiment and manufacturing,"
said Evercore's Shipley. "It's not just a U.S. thing, it's
global."
    
      July 29 Monday 10:11AM New York / 1411 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.0775       2.1227    0.005
 Six-month bills               2.045        2.1002    -0.003
 Two-year note                 99-209/256   1.8439    -0.026
 Three-year note               99-214/256   1.8071    -0.027
 Five-year note                99-156/256   1.8321    -0.030
 Seven-year note               99-166/256   1.9289    -0.030
 10-year note                  102-208/256  2.0563    -0.025
 30-year bond                  106-8/256    2.5834    -0.018
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         3.25         0.25    
 spread                                               
 U.S. 3-year dollar swap         0.50         0.50    
 spread                                               
 U.S. 5-year dollar swap        -2.50         0.75    
 spread                                               
 U.S. 10-year dollar swap       -7.75         0.00    
 spread                                               
 U.S. 30-year dollar swap      -36.75        -0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)
  
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