July 2, 2019 / 4:58 PM / 14 days ago

TREASURIES-U.S. yields fall on growth worries, U.K. gilt rally

    * BOE's Carney remarks send U.K. yields to 2-1/2 year lows
    * NYC business outlook turns most dour in a decade - ISM-NY 
    * Investors most upbeat on Treasuries since late May -
survey
    * U.S. financial markets to close early on Wednesday

 (Updates market action,)
    By Richard Leong
    NEW YORK, July 2 (Reuters) - U.S. Treasury prices rose on
Tuesday, with 10-year yields falling below 2%, on renewed
safe-haven demand due to anxiety about slowing global economic
growth and reduced optimism about the restart on U.S.-China
trade talks.
    U.S. yields were also pressured by a drop in British yields
to 2-1/2 year lows after Bank of England Governor Mark Carney
cited risks from Brexit and trade conflicts in a speech that
prompted speculation the BOE may lower interest rates in the
next 12 months.
    At the G20 summit in Japan last weekend, Washington and
Beijing agreed to renegotiate after U.S. President Donald Trump
offered concessions, including no new tariffs and an easing of
restrictions on tech company Huawei, while China approved making
unspecified new purchases of U.S. farm products.
    While this development is seen as encouraging for the global
economy, traders and investors remain cautious about a trade
deal between the world's two biggest economies due to the lack
of details about the resumption of talks.
    "We're headed in a very good direction," White House trade
adviser Peter Navarro said in an interview with CNBC television.
"It's complicated, as the president said, correctly, this will
take time and we want to get it right. So let's get it right."

    Traders and investors have since shifted focus to the spate
of weaker-than-expected manufacturing data around the world,
which may push the U.S. Federal Reserve and other major central
banks to consider easing their monetary policies, analysts said.
    "In general, the initial reactions post-G20 has faded a
bit," said Jonathan Cohn, interest rate strategist at Credit
Suisse. "We are seeing weakness in global PMIs."
    Earlier Tuesday, the six-month business outlook among New
York City's purchasing managers dropped to the lowest in a
decade in June, the Institute for Supply Management-New York
said.
    The softening in manufacturing activity around the world
stemmed largely from the trade conflict between the United
States and its trading partners. 
    The cloudy economy outlook has underpinned the appeal of
low-risk U.S. government bonds.
    Bond investors were the most bullish about owning U.S.
longer-dated government debt since May 28, a JPMorgan survey
showed on Tuesday.
    At 12:54 p.m. (1654 GMT), benchmark 10-year U.S. Treasury
note yields were down 5.40 basis points at 1.979%.  
    They held above 1.974% reached on June 20, which was their
lowest since November 2016.
    The U.S. bond market will close early at 2 p.m. on
Wednesday, ahead of the U.S. July Fourth holiday on Thursday.
July 2 Tuesday 12:41PM EDT/ 1641 GMT
                               Price                   
 US T BONDS SEP9               156-3/32     1-3/32     
 10YR TNotes SEP9              128-40/256   0-120/256  
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             2.1575       2.2056     0.006
 Six-month bills               2.03         2.0796     -0.015
 Two-year note                 99-192/256   1.7532     -0.034
 Three-year note               100-36/256   1.7008     -0.043
 Five-year note                100-8/256    1.7434     -0.053
 Seven-year note               100-44/256   1.8487     -0.055
 10-year note                  103-144/256  1.9757     -0.057
 30-year bond                  107-184/256  2.5063     -0.051
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap         4.75        -0.75     
 spread                                                
 U.S. 3-year dollar swap         3.25        -0.25     
 spread                                                
 U.S. 5-year dollar swap        -0.50        -0.25     
 spread                                                
 U.S. 10-year dollar swap       -4.00         0.25     
 spread                                                
 U.S. 30-year dollar swap      -31.50         0.25     
 spread                                                
 
    
 (Reporting by Richard Leong; Editing by Jonathan Oatis and
Richard Chang)
  
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