August 12, 2019 / 2:02 PM / 4 months ago

TREASURIES-U.S. yields slide on global trade worries and political tension

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 12 (Reuters) - U.S. Treasury yields dropped
across the board on Monday, in line with weakness in the stock
market, as trade worries and political tensions around the world
in places such as Hong Kong and Argentina continued to support
safe-haven assets. 
    U.S. long-term yields have fallen in six of the past nine
sessions, reflecting investors' diminished risk appetite.
European bond yields were also lower on the day.
    "It has nothing to do with the U.S. economy. Politically
around the world, things are getting tenuous," said Stan
Shipley, fixed income strategist at Evercore ISI in New York. 
    "What happened over the weekend with the Hong Kong protests
turned capital markets around. Then there's Argentina, Italy,
and we haven't even talked about Brexit here. So you're seeing
this flight to safety," Shipley added.
    Protests out of Hong Kong over the weekend, which stemmed
from opposition to a bill allowing extradition to the mainland,
crippled the city's airport, while the defeat of President
Mauricio Macri during primary elections in Argentina added to
global anxiety.
    There are also political problems in Italy after the League
party last week filed a no-confidence motion against its own
governing coalition. The party's populist chief Matteo Salvini
hopes that last week's move will trigger early elections and
install him as the new leader.
    There is likewise continued concern about the U.S.-China
trade conflict. A week ago, China allowed the yuan to
break through the key 7-per-dollar level for the first time
since 2008, prompting Washington to label Beijing a currency
manipulator and sparking market turmoil.
    In morning trading, U.S. benchmark 10-year note yields fell
to 1.684%, from 1.734% late on Friday.
    Since the beginning of the year, 10-year yields have fallen
by at least 100 basis points, on track for its steepest drop in
eight years.
    Yields on 30-year bonds slid to 2.188%, from
2.247% on Friday.
    At the short end of the curve, two-year yields slipped to
1.593%, from Friday's 1.63%.
   "As long as there is global political tension, we're going to
get downward pressure on U.S. yields," Evercore's Shipley said. 
    Analysts also said Monday's moves may have been exacerbated
by a slew of holidays in Asia, particularly Japan, Singapore,
and India. Volume as result was thinner than normal for this
time of the year.
      August 12 Monday 9:52 AM New York/1352 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.9575       1.994     -0.008
 Six-month bills               1.9          1.9499    0.000
 Two-year note                 100-77/256   1.5938    -0.036
 Three-year note               99-232/256   1.5321    -0.040
 Five-year note                101-26/256   1.5188    -0.044
 Seven-year note               101-216/256  1.5942    -0.047
 10-year note                  99-124/256   1.6812    -0.053
 30-year bond                  101-100/256  2.1865    -0.060
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        -1.00         0.25    
 U.S. 3-year dollar swap        -4.00         0.25    
 U.S. 5-year dollar swap        -7.25         0.00    
 U.S. 10-year dollar swap      -12.00        -0.25    
 U.S. 30-year dollar swap      -42.25        -0.75    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Will Dunham)
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