November 9, 2018 / 4:00 PM / 7 days ago

TREASURIES -U.S. yields recede from decade highs as equities fall

    * Worries about Chinese growth spur equities sell-off
    * Risk appetite fades as Fed hints at more U.S. rate hikes
    * U.S. producer prices grow fastest in 6 years in Oct
    * U.S. bond market to close Monday for Veterans Day

 (New throughout, updates prices, market activity and comments)
    By Richard Leong
    NEW YORK, Nov 9 (Reuters) - U.S. Treasury yields fell on
Friday with shorter-dated yields retreating from the highest
levels in a decade, as investors scooped up safe-haven U.S.
government debt due to losses in equity prices worldwide on
worries about economic growth in China and interest rate hikes
in the United States.
    The yield decline was limited after data showed U.S.
producer prices in October accelerated at the quickest rate in
six years, supporting the view U.S. inflation would hold near
the Federal Reserve's goal of 2 percent.
    Trading volume was light ahead Monday when the U.S. bond
market will be closed for the Veterans Day holiday.
    Treasury yields were poised to end the week mixed, with
traders attributing large swings to uncertainty about the
outcome of the U.S. midterm congressional elections; the $83
billion quarterly refunding; and Federal Reserve signals on
interest rates.
    "The market after a week filled with major events feels
fatigued," said Larry Milstein, head of government and agency
trading at R.W. Pressprich & Co. in New York.
    At 10:36 a.m. (1536 GMT), benchmark 10-year Treasury yields
 was down 3 basis points at 3.202 percent, on track
to end the week marginally lower.
    The two-year yield was down nearly 3 basis points
at 2.941 percent a day after touching a 10-1/2-year peak of
2.977 percent. It was poised to rise nearly 3 basis points on
the week.
    The five-year yield scaled down to 3.054 percent,
headed for a weekly increase of more than 1 basis point after
hitting a 10-year high of 3.098 percent on Thursday.
    The U.S. central bank, after a two-day policy meeting,
signaled the economic expansion remains on track, which would
allow for further rate increases.
    Interest rates futures implied traders placed about a 76
percent chance the Fed would raise key lending rates by a
quarter point to 2.25-2.50 percent at its Dec. 18-19 meeting,
according to CME Group's FedWatch program.
    Treasuries yields briefly turned flat early Friday, as
stronger-than-forecast data on U.S. producer prices renewed some
concerns that inflation is rising.
    The tit-for-tat tariffs between China and the United States,
the world's two biggest economies, seem to be taking a toll on
Chinese producers. China's producer inflation fell for a fourth
straight month in October.
    Worries about slowing growth in China touched off selling of
shares on major global equities markets. On Wall Street, the S&P
500 was down nearly 1 percent.
November 9 Friday 10:37AM New York / 1537 GMT
                               Price                  
 US T BONDS DEC8               137-22/32    16/32     
 10YR TNotes DEC8              118-8/256    8/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.31         2.3551    -0.003
 Six-month bills               2.4575       2.5221    0.002
 Two-year note                 99-224/256   2.9406    -0.028
 Three-year note               99-156/256   3.0121    -0.033
 Five-year note                99-44/256    3.0559    -0.034
 Seven-year note               99-44/256    3.1332    -0.033
 10-year note                  99-88/256    3.2022    -0.030
 30-year bond                  99-128/256   3.4017    -0.023
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       25.90        -0.85     
 30-year vs 5-year yield       34.50        0.45      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        18.50         0.50    
 spread                                               
 U.S. 3-year dollar swap        15.50         0.75    
 spread                                               
 U.S. 5-year dollar swap        12.25         0.25    
 spread                                               
 U.S. 10-year dollar swap        5.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -10.25        -0.25    
 spread                                               
 
    
 (Reporting by Richard Leong; Editing by David Gregorio)
  
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