May 7, 2019 / 2:29 PM / 13 days ago

TREASURIES-U.S. yields fall on trade worries before 3-year supply

 (Updates market action, adds quotes, graphic)
    By Richard Leong
    NEW YORK, May 7 (Reuters) - U.S. Treasury yields fell on
Tuesday for a second day with 10-year yields slipping below
2.50%, prompted by worries about renewed trade tension between
China and the United States and its impact on global economic
growth.
    Safe-haven demand for U.S. government debt bodes well for
this week's $84 billion May refunding, which kicks off with a 
three-year note sale at 1 p.m. (1700 GMT).
    "The inaugural coupon supply for May’s refunding week will
be today's $38 (bln) 3-year auction, and given the latest trade
war salvo there is surely at least a modest bullish backdrop to
today’s supply," BMO Capital Markets analysts wrote in a
research note. 
    On Sunday, U.S. President Donald Trump threatened to raise
tariffs on $200 billion worth of Chinese goods to 25% from 10%
by the end of the week, and would "soon" target remaining
Chinese imports with tariffs. 
    The surprise decision cast doubts over the world's two
biggest economies reaching a trade agreement any time soon.
    Traders are pinning hopes that a deal is still within reach
after Beijing said earlier on Tuesday that Chinese Vice Premier
Liu will visit the United States this week for trade talks.

    At 10:13 a.m. (1413 GMT), the yield on benchmark 10-year
Treasury notes was down 3.3 basis points at 2.4674%.
    Thirty-year yields were 3 basis points lower at
2.8782%.
    In "when-issue" activity, traders expected the upcoming
three-year issue to sell at a yield of 2.241%,
which was higher than the 2.301% at the previous three-year
auction in April, Tradeweb data showed. 
May 7 Tuesday 10:20AM New York / 1420 GMT
                               Price                  
 US T BONDS JUN9               148-14/32    20/32     
 10YR TNotes JUN9              123-232/256  9/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.38         2.4278    0.002
 Six-month bills               2.38         2.4425    -0.008
 Two-year note                 99-240/256   2.2824    -0.027
 Three-year note               100          2.2498    -0.027
 Five-year note                99-242/256   2.2616    -0.031
 Seven-year note               100-28/256   2.3579    -0.037
 10-year note                  101-96/256   2.4656    -0.034
 30-year bond                  102-108/256  2.8782    -0.030
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       18.20        0.55      
 30-year vs 5-year yield       61.50        -0.90     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        10.50         0.50    
 spread                                               
 U.S. 3-year dollar swap         6.75         0.00    
 spread                                               
 U.S. 5-year dollar swap         4.25         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.75         0.50    
 spread                                               
 U.S. 30-year dollar swap      -25.00         0.25    
 spread                                               
 
 (Reporting by Richard Leong
Editing by Chizu Nomiyama and Susan Thomas)
  
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