September 16, 2019 / 6:12 PM / a month ago

TREASURIES-Yields fall as soaring oil adds to global growth fears

 (Adds yield curve, updates prices)
    * Oil price surge may add to economic weakness
    * Federal Reserve expected to cut rates on Wednesday

    By Karen Brettell
    NEW YORK, Sept 16 (Reuters) - U.S. Treasury yields fell on
Monday after weekend attacks on crude facilities in Saudi Arabia
shut about 5% of the world's oil supply, sending oil prices
soaring and increasing demand for safe haven U.S. debt.
    U.S. officials blamed Iran and President Donald Trump said
Washington was "locked and loaded" to retaliate.             
    The Iran-aligned Houthi movement that controls Yemen's
capital claimed responsibility for the attack, which damaged the
world's biggest crude oil processing plant. Iran denied blame
and said it was ready for "full-fledged war."
    "It's a flight to quality as a result of the Saudi oil field
attacks, which have added yet another uncertainty for the Fed
and the global growth outlook," said Ian Lyngen, head of U.S.
rates strategy at BMO Capital Markets in New York.
    Benchmark 10-year notes             gained 18/32 in price to
yield 1.838%. The yield is down from a one-and-a-half month high
of 1.908% reached on Friday, but up from three-year lows of
1.429% reached on Sept. 3. 
    The yield curve between two-year and 10-year notes
               flattened to 8 basis points, from 10 basis
points.
    The conflict comes as global central banks are cutting
interest rates in a bid to revive flagging growth.
    The Federal Reserve is expected to cut rates by 25 basis
points when it concludes its two-day meeting on Wednesday.
    Data from China added to global growth concerns on Monday,
with growth in industrial production dropping to its weakest in
17-1/2 years amid spreading pain from a trade war with the
United States and softening domestic demand.             
    In the United States, the New York Federal Reserve said its
gauge of business growth in New York state declined more than
forecast in September.             

 (Reporting by Karen Brettell; Editing by Will Dunham)
  
 
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