August 12, 2019 / 9:43 PM / 3 months ago

TREASURIES-U.S. yields tumble on trade worries, political tension

    * Hong Kong protests, Argentina weigh on Treasuries
    * U.S. 30-year yields fall to more than 3-year low
    * U.S. yield curve flattens significantly
    * U.S. long-term yields fall in six of last 9 sessions
    * U.S. 10-year yields down more 100 basis points since

 (Updates U.S. 2-year/10-year spread, prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 12 (Reuters) - U.S. Treasury yields fell on
Monday, in line with the weak stock market, as trade worries and
global political tensions from Hong Kong to Argentina supported
safe-haven assets.
    U.S. 30-year bond yields slid to their lowest since July
2016. 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.
    The U.S. yield curve has also flattened significantly,
suggesting anxiety is rising. The yield spread between U.S.
2-year and 10-year notes, a closely watched metric, narrowed to
5.3 basis points, the smallest difference since June 2007,
according to Refinitiv data.
    The bond rally was triggered by protests in Hong Kong that
crippled Hong Kong's airport over the weekend, after being
sparking by opposition to a bill allowing extradition to
mainland China. Meanwhile in Argentina, the defeat of President
Mauricio Macri during primary elections added to global stress.

    "The Hong Kong demonstrations and their ability to shut down
the airport and the surprise in Argentina took the wind out of
the sails of the stock market," said Jim Vogel, interest rates
strategist at FTN Financial in Memphis, Tennessee.
    "We're back to worrying that things are still unsettled and
so there's no need to push stocks higher, and without that
optimism, without that 'things-are-getting-better' impulse
behind stocks, Treasury yields are moving to the lower middle of
the range," he added.
    Italy also saw political ructions 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
the motion move will trigger early elections and have him
installed as the new leader.
    Concerns about the U.S.-China trade conflict persisted. 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.
    Analysts also said Monday's bond rally was exaggerated by a
slew of holidays in Asia, particularly Japan, Singapore and
    In afternoon trading, U.S. benchmark 10-year Treasury note
yields fell to 1.64% from 1.734% late on Friday.
    Since the beginning of the year, 10-year yields have fallen
more than a hundred basis points, on track for its steepest drop
in eight years.
    Yields on 30-year bonds slid to 2.13%, from
2.247% on Friday. They earlier fell to a more than three-year
low of 2.119%.
    At the short end of the curve, two-year yields slipped to
1.581%, from Friday's 1.63%.
   "As long as there is global political tension, we're going to
get downward pressure on U.S. yields," Stan Shipley,
fixed-income strategist, at Evercore ISI in New York, said.
      Monday, Aug. 12, at 1727 EDT (2127 GMT):
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.9475       1.9838    -0.018
 Six-month bills               1.885        1.9343    -0.016
 Two-year note                 100-85/256   1.5776    -0.052
 Three-year note               99-252/256   1.5053    -0.067
 Five-year note                101-66/256   1.4862    -0.077
 Seven-year note               102-24/256   1.5566    -0.084
 10-year note                  99-220/256   1.6403    -0.094
 30-year bond                  102-180/256  2.1276    -0.119
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        -2.00        -0.75    
 U.S. 3-year dollar swap        -4.50        -0.25    
 U.S. 5-year dollar swap        -6.75         0.50    
 U.S. 10-year dollar swap      -11.25         0.50    
 U.S. 30-year dollar swap      -40.25         1.25    

 (Reporting by Gertrude Chavez-Dreyfuss; editing by G Crosse)
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