November 14, 2019 / 2:37 PM / a month ago

TREASURIES-Yields fall as trade deal seen less certain

    * Optimism ebbs on U.S.-China trade deal 
    * Bonds retrace selloff exaggerated by technical factors
    * Chinese factory output slowed in October

    By Karen Brettell
    NEW YORK, Nov 14 (Reuters) - U.S. Treasury yields fell on
Thursday as investors reassessed the likelihood that the United
States and China are close to reaching a deal to de-escalate
their trade war and as bonds retraced last week’s selloff, which
was exaggerated by technical factors.
    On Tuesday, U.S. President Donald Trump said the two
countries were close to a deal but that if one is not made,
Washington will raise tariffs on Chinese imports.             
On Wednesday, the Wall Street Journal reported that the trade
talks have hit a snag over farm purchases.             
    “There is a more realistic assessment of the current stance
of trade negotiations,” said Jon Hill, an interest rate
strategist at BMO Capital Markets in New York.
    The trade war has been blamed for slowing global growth, and
disappointing data from China on Thursday added to growth fears.
    China's factory output growth slowed significantly more than
expected in October, as weakness in global and domestic demand
weighed on broad segments of the world's second-largest economy.
            
    Bonds also gained as the extent of the selloff last week was
viewed as exaggerated due to the size and speed of the move.
    Benchmark 10-year note yields             rose to 1.973%
last Thursday, which was the highest since Aug. 1, and have
climbed from 1.670% on Nov. 1.
    “A lot of the reason for the rather large selloff we saw was
rather technical in nature, basically a couple of supports were
breached in quick succession,” said Hill. “It’s a little bit
unsustainable unless you have fundamental information to go
with.”
    On Thursday, the yields fell to 1.831%, from 1.869% late
Wednesday.
    U.S. data on Thursday showed that U.S. producer prices
increased by the most in six months in October, lifted by gains
in the costs of goods and services.             
    Retail sales data on Friday is the next major economic
focus.

 (Editing by David Gregorio)
  
 
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