March 14, 2019 / 3:04 PM / 2 months ago

TREASURIES-U.S. yields inch up, but range-bound amid trade, Brexit uncertainty

    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 14 (Reuters) - U.S. Treasury yields were
little changed to slightly higher on Thursday, but confined
within narrow ranges, amid uncertainty regarding trade talks
between the United States and China after a report said a deal
is unlikely to happen this month, but in April.
    U.S. long-dated yields were the most affected by ongoing
global tension, falling in seven of the last nine sessions. 
    Worries about Britain's exit from the European Union have
also added to the downward pressure on rates in the last few
weeks.
    "When you look at Trump and Xi, it's clear that both parties
want to make a trade deal here," said Brian Giuliano, vice
president, portfolio management, at Brandywine Global Investment
 Management in Philadelphia, referring to U.S. President Donald
Trump and Chinese President Xi Jinping.
    "But market sentiment has shifted on trade," he added,
noting that reports about a trade agreement delay is a big deal
to Treasury investors.
    "A year ago, trade policy was exacerbating volatility.
Today, trade policy uncertainty is now one of the key drivers of
volatility in the market," Giuliano said.
    Bloomberg on Thursday, citing unnamed sources, reported that
a meeting between Trump and Xi to resolve the ongoing trade war
conflict will not take place this month and is more likely to
occur in April at the earliest.
    Aside from China, investors are closely watching Brexit as
well. 
    The British parliament is due to vote on Thursday on seeking
a last-minute Brexit delay, while Prime Minister Theresa May
piled renewed pressure on reluctant lawmakers to back her EU
divorce deal at the third time of asking.
    "With no deep clarity as to the length of any such delay,
we'd offer that the most growth-negative outcome would be the
possibility of a series of rolling short-term extensions of a
few months," said BMO Capital Markets in a research note.
    "This would serve to maintain high levels of uncertainty and
perpetuate Brexit fatigue."
    In late morning trading, U.S. 10-year note yields edged up
to 2.621 percent from 2.610 percent late on
Wednesday.
    U.S. 30-year bond yields were up at 3.017 percent
 from 3.01 percent on Wednesday.
    On the short end of the curve, U.S. 2-year yields inched up
to 2.456 percent, compared with Wednesday's 2.453 percent
.
    Data showing a rise in U.S. weekly jobless claims and a
sharp decline in new home sales had minimal impact on
Treasuries, but they do support market expectations that the
Federal Reserve will hold interest rates throughout the year.

    
    March 14 Thursday 10:52 AM New York / 1452 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.4          2.448     -0.004
 Six-month bills               2.4475       2.5124    -0.013
 Two-year note                 100-20/256   2.4586    0.006
 Three-year note               99-226/256   2.4157    0.008
 Five-year note                99-196/256   2.4253    0.011
 Seven-year note               99-228/256   2.5171    0.013
 10-year note                  100-8/256    2.6213    0.011
 30-year bond                  99-164/256   3.0183    0.008
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        11.50         0.25    
 spread                                               
 U.S. 3-year dollar swap         9.50         0.50    
 spread                                               
 U.S. 5-year dollar swap         6.50         0.00    
 spread                                               
 U.S. 10-year dollar swap        1.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -21.25         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan
Oatis)
  
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