September 10, 2019 / 2:17 PM / 10 days ago

TREASURIES-U.S. yields rise, tracking German bonds, on stimulus talk

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 10 (Reuters) - U.S. Treasury yields climbed
to fresh three-week peaks on Tuesday, tracking German bonds, as
risk appetite continued to improve amid diminishing U.S.-China
trade tensions and expectations of fiscal stimulus measures from
Germany, Europe's largest economy. 
    Guy LeBas, chief fixed income strategist at Janney
Montgomery Scott in Philadelphia, said on the margin, market
sentiment has turned for now.
    "What has really fallen away and taken less tail downside
risk off the table was a bit of calming in the trade rhetoric,"
he added. 
    Washington and Beijing could be back at the negotiating
table sometime this month.
    U.S. yields rose for a second straight session, with
investors also awaiting a key monetary policy meeting at the
European Central Bank on Thursday. Investors expect the ECB to
cut interest rates, but may introduce some form of compensation
for banks to offset the unwelcome side effects of negative
interest rates.
    "The real fulcrum event is the ECB  meeting and that will
drive Bunds, which in turn, have had a massive influence on
Treasuries over the course of the last eight weeks or so," LeBas
said.
    Germany's 30-year government bond yield briefly turned
positive on Tuesday, ahead of the ECB meeting and bolstered by
possible stimulus measures from its government.
    German Finance Minister Olaf Scholz said on Tuesday the
government can counter a possible economic crisis by injecting
billions of euros into the economy, signaling readiness for a
big stimulus package if the economy tips into recession.

    In morning trading, U.S. benchmark 10-year note yields
 rose to 1.643% from 1.622% late on Monday. Early in
the session, 10-year yields hit a three-week high of 1.658%.
    Since the beginning of the year, however, 10-year yields
have fallen more than 100 basis points.
    "There's room for a little bit of bounce," said Janney's
LeBas. "There's support around 1.71% in the 10-year."
    But this is all temporary, he said. "Twelve months from now,
I suspect rates will have revisited the all-time lows."
    Yields on 30-year bonds advanced to 2.118% from
2.098% on Monday, rallying from record lows of 1.905% touched in
late August. U.S. 30-year yields also hit a three-week peak of
2.141% earlier in the global session.
    At the short end of the curve, U.S. two-year yields rose to
1.603% from Monday's 1.575%, hitting a three-week
high as well of 1.609%.
    Later on Tuesday, the U.S. Treasury kicks off $78 billion 
in auctions this week with the $38 bln three-year note offering.
    
      September 10 Tuesday 10:00 AM New York / 1400 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.9175       1.9591    0.000
 Six-month bills               1.8325       1.8805    0.010
 Two-year note                 99-206/256   1.601     0.026
 Three-year note               99-224/256   1.5437    0.028
 Five-year note                98-200/256   1.5054    0.028
 Seven-year note               98-156/256   1.5865    0.029
 10-year note                  99-208/256   1.6455    0.023
 30-year bond                  102-228/256  2.119     0.021
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -0.25         0.25    
 spread                                               
 U.S. 3-year dollar swap        -4.25         0.50    
 spread                                               
 U.S. 5-year dollar swap        -6.25         0.00    
 spread                                               
 U.S. 10-year dollar swap      -11.25        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -41.75        -0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Chizu Nomiyama)
  
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