October 15, 2019 / 6:34 PM / a month ago

TREASURIES-Yields rise on report Britain, EU close to Brexit deal

 (Recasts with yield increase, updates prices)
    * Hopes of Brexit deal boosts risk appetite
    * Optimism on U.S.-China trade deal fades
    * Fed seen likely to cut rates later this month

    By Karen Brettell
    NEW YORK, Oct 15 (Reuters) - U.S. Treasury yields rose to a
three-week high on Tuesday on a report that British and European
Union negotiators were close to a deal for Britain to exit the
European Union, spurring an increase in risk taking and reducing
demand for safe haven debt.
    Bloomberg News reported that negotiators were closing in on
a draft deal, with hopes an agreement will be reached by
    Two EU officials told Reuters, however, that any discussion
that the two sides are close to agreeing to a text of a Brexit
deal is “premature.”
    Benchmark 10-year yields rose as high as 1.773%,
the highest since Sept. 20, and up from 1.753% late Friday. The
bond market was closed on Monday for the Columbus Day holiday.
    The news overturned an earlier rally in Treasury prices, as
investors pared back expectations that the United States and
China are close to reaching an agreement to end their trade war.
    Reports of a "Phase 1" trade deal between the United States
and China last week increased risk appetite. However the dearth
of details around the agreement has since curbed this
    U.S. Treasury Secretary Steven Mnuchin said on Monday that
an additional round of tariffs on Chinese imports will likely be
imposed if a trade deal with China is not reached but added that
he expected the agreement to go through.
    “Any good news was going to bring a big reaction and the
idea that the U.S. sort of oversold the accomplishment wasn’t a
complete surprise either, and was perhaps factored in to some of
the reaction last week,” said Jim Vogel, an interest rate
strategist at FTN Financial in Memphis, Tennessee.
    Retail sales data on Wednesday is the next major economic
focus and will be evaluated for the strength of U.S. consumer
    The Federal Reserve is expected to cut rates when it meets
on October 29-30 though Fed policymakers are divided on whether
further cuts are needed for the economy.
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.64         1.6738    -0.008
 Six-month bills               1.625        1.6653    -0.016
 Two-year note                 99-197/256   1.6201    0.006
 Three-year note               99-86/256    1.6028    0.017
 Five-year note                99-142/256   1.5937    0.017
 Seven-year note               99-168/256   1.6775    0.010
 10-year note                  98-192/256   1.764     0.011
 30-year bond                  100-124/256  2.2276    0.014
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         4.25        -0.25    
 U.S. 3-year dollar swap         0.75        -0.50    
 U.S. 5-year dollar swap        -0.75        -0.25    
 U.S. 10-year dollar swap       -7.75         0.50    
 U.S. 30-year dollar swap      -37.50         0.50    

 (Editing by Nick Zieminski)
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