November 9, 2018 / 8:15 PM / 6 days ago

TREASURIES -U.S. yields retreat from decade highs as stocks swoon

    * 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

 (Updates market action, adds quote)
    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 equities worldwide on worries
about economic growth in China and U.S. interest rate hikes.
    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 of Monday's Veterans Day
holiday when the U.S. bond market will be closed.
    Treasury yields were poised to end the week mixed, with
traders attributing large swings to uncertainty about the
outcome of the U.S. congressional elections; the $83 billion
quarterly refunding; and Fed 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.
    Benchmark 10-year Treasury yields was down 4
basis points at 3.191 percent, on track to end the week modestly
lower.
    The two-year yield was down nearly 4 basis points
at 2.932 percent a day after touching a 10-1/2-year peak of
2.977 percent. It was poised to rise 2 basis points on the week.
    The five-year yield scaled down to 3.046 percent,
headed for a weekly increase of less 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.
    "The market is pretty convinced the Fed would raise rates in
December," said Larry Hatheway, chief economist at GAM
Investments in Zurich.
    Treasuries yields briefly turned flat early Friday, as
stronger-than-forecast U.S. producer prices renewed some
concerns about rising inflation.
    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 1.4 percent.
    
    Friday, Nov. 9 at 1456 EST (1956 GMT):
                               Price                  
 US T BONDS DEC8               137-27/32    21/32     
 10YR TNotes DEC8              118-28/256   11/32     
                               Price        Current   Net
                                            Yield     Change
                                            (pct)     (bps)
 Three-month bills             2.31         2.3551    -0.003
 Six-month bills               2.4525       2.5169    -0.003
 Two-year note                 99-228/256   2.9324    -0.037
 Three-year note               99-164/256   3.0012    -0.044
 Five-year note                99-56/256    3.0456    -0.044
 Seven-year note               99-60/256    3.1231    -0.043
 10-year note                  99-112/256   3.1911    -0.041
 30-year bond                  99-164/256   3.3942    -0.031
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       25.70        -1.10     
 30-year vs 5-year yield       34.70        0.65      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.00         1.00    
 spread                                               
 U.S. 3-year dollar swap        16.25         1.50    
 spread                                               
 U.S. 5-year dollar swap        13.00         1.00    
 spread                                               
 U.S. 10-year dollar swap        5.75         0.50    
 spread                                               
 U.S. 30-year dollar swap       -9.75         0.25    
 spread                                               
 
    

    
 (Reporting by Richard Leong; Editing by David Gregorio and
Richard Chang)
  
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