November 16, 2018 / 4:59 PM / a month ago

TREASURIES-U.S. yields slide after Fed's Clarida comments

    * Fed's Clarida says rates nearing neutral level
    * Fed's Kaplan, in Fox interview, warns about slowing global
growth

 (Adds comments by analyst and Fed officials, table, byline;
updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 16 (Reuters) - U.S. Treasury yields retreated
on Friday after a top Federal Reserve official said U.S.
interest rates are nearing the central bank's estimates of a
neutral level, suggesting that the current tightening cycle may
soon end.
    In a CNBC interview at the U.S. central bank's Washington
headquarters, Fed Vice Chair Richard Clarida said he did not
believe the Fed had raised rates too much or too quickly.
    But he noted that the Fed needs to be particularly
data-dependent as rates near the 2.5 percent to 3.5 percent
"neutral" range that neither stimulates nor brakes economic
growth.
    U.S. two-year yields, the maturity most sensitive to rate
expectations, dropped to two-week lows, while the benchmark
10-year yield fell to 3.018 percent, also a two-week low.
    "The big driver right now is Fed speech," said Guy LeBas,
chief fixed income strategist, at Janney Montgomery Scott in
Philadelphia.
    "Clarida's comments were the first public statement since
being appointed vice chair. He indicated a modestly dovish bent
on Fed policy, and not a particularly aggressive stance," he
added.
    In an interview with Fox Business News on Friday, Dallas Fed
President Robert Kaplan said the U.S. economy is stronger than
he had thought but faces headwinds next year from weaker global
economic conditions, as well as fading impact from President
Donald Trump's tax reform.
    Chairman Jerome Powell on Wednesday had also cited slowing
global growth as an emerging concern among Fed officials as they
debate how much further and how quickly to raise their
short-term policy rate.
    "The one thing that is worth noting that all three - Powell,
Clarida, and Kaplan referenced negative feedback from foreign
economic conditions," Janney's LeBas said. 
    "They also used fairly similar language too that suggests
that the Federal Reserve is concerned about policy implications
from global growth," he added.
    In early trading, U.S. 10-year note yields fell as low as
3.081 percent, from 3.118 percent late Thursday.
Yields were last at 3.084 percent.
    U.S. 30-year bond yields were down at 3.348 percent
, from 3.366 percent on Thursday.
    On the short end of the curve, U.S. two-year yields slid to
a two-week trough of 2.812 percent, compared with Thursday's
2.862 percent.
    
      November 16 Friday 11:16AM New York / 1616 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.315        2.3604    -0.006
 Six-month bills               2.44         2.5041    -0.011
 Two-year note                 100-28/256   2.8164    -0.046
 Three-year note               100-10/256   2.8612    -0.052
 Five-year note                99-232/256   2.8953    -0.050
 Seven-year note               100-16/256   2.9898    -0.040
 10-year note                  100-84/256   3.0865    -0.032
 30-year bond                  100-116/256  3.3509    -0.015
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.75         0.25    
 spread                                               
 U.S. 3-year dollar swap        17.25         0.00    
 spread                                               
 U.S. 5-year dollar swap        14.50         0.25    
 spread                                               
 U.S. 10-year dollar swap        6.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -11.25        -0.75    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Chizu Nomiyama and Richard Chang)
  
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