September 11, 2019 / 2:34 PM / 3 months ago

TREASURIES-U.S. yields rise for 3rd day, tracking Europe, as ECB meeting looms

    * ECB in focus; investors brace for less-aggressive policy
    * China announces tariff exemptions on U.S. goods
    * U.S. producer prices rise; core PPI rebounds
    * U.S. to auction 10-year notes later in session

 (Recasts, adds analyst comment, details, Treasuries table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 11 (Reuters) - U.S. Treasury yields rose on
Wednesday for a third straight day, moving in lock step with the
euro zone bond market, amid uncertainty about Thursday's
European Central Bank meeting, which could prove less-aggressive
in easing monetary policy.
    U.S. benchmark 10-year and 2-year notes climbed to five-week
peaks, while those on 30-year bonds advanced to four-week highs.
In the euro zone, most 10-year bond yields gained, holding close
to recent highs.
    Analysts said a report late on Tuesday that the ECB may
delay quantitative easing and tie it to upcoming economic data
may have triggered the latest sell-off in European debt.

    "There was an expectation that the ECB would be aggressive
with easing," said Tom Simons, economist at Jefferies in New
York. "If they're not, that kind of changes the calculus a
little bit. There's nervousness on that front, so there's a lot
of paring back of positions."
    A Reuters poll showed nearly 70 economists were expecting
the ECB to cut its deposit rate at the meeting, predicting a 10
basis point reduction to -0.5%. But a majority of economists
also believed the ECB could introduce some form of compensation
for banks to offset the adverse impact of negative rates.

    U.S. yields also found support from a further easing in
U.S.-China trade tensions after President Donald Trump fired his
national security adviser, John Bolton, perceived as a China
policy hawk, amid disagreements on foreign policy.
    Concerns about the trade dispute further waned after China
on Tuesday announced its first batch of tariff exemptions for 16
types of U.S. products, days ahead of a planned meeting between
trade negotiators.
    In mid-morning trading, U.S. 10-year note yields
rose to 1.731% from 1.702% late on Tuesday. Early in the
session, 10-year yields hit a five-week high of 1.752%.
    Yields on 30-year bonds also advanced, to 2.213%
from 2.181% on Tuesday, moving further away from record lows of
1.905% touched in late August. U.S. 30-year yields also hit a
four-week peak of 2.233% earlier in the global session.
    At the short end of the curve, U.S. two-year yields rose to
1.668% from Tuesday's 1.664%, hitting a five-week
high of 1.686%.
    U.S. yields extended their rise after data showed core U.S.
producer prices rebounded in August after falling the previous
month, suggesting some pick-up in inflation.
    Later on Wednesday, the Treasury will auction $24 billion of
re-opened U.S. 10-year notes.
      September 11 Wednesday 10:16AM New York / 1416 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.92         1.9615    0.000
 Six-month bills               1.84         1.8882    -0.005
 Two-year note                 99-175/256   1.6641    0.000
 Three-year note               99-178/256   1.6045    0.013
 Five-year note                98-106/256   1.5832    0.018
 Seven-year note               98-20/256    1.6683    0.025
 10-year note                  99-12/256    1.7299    0.028
 30-year bond                  100-212/256  2.212     0.031
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        -1.25         0.75    
 U.S. 3-year dollar swap        -4.25         1.50    
 U.S. 5-year dollar swap        -6.50         0.25    
 U.S. 10-year dollar swap      -12.00        -0.25    
 U.S. 30-year dollar swap      -42.25        -0.25    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve
Orlofsky and Dan Grebler)
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