June 19, 2018 / 1:22 PM / 9 months ago

TREASURIES-Yields tumble as U.S.-China trade war ramps up

    By Gertrude Chavez-Dreyfuss
    NEW YORK, June 19 (Reuters) - U.S. Treasury yields fell on
Tuesday, as trade tensions between China and the United States
intensified after President Donald Trump threatened to impose a
10 percent tariff on $200 billion of Chinese goods and Beijing
warned it would retaliate.
    U.S. 10-year and 30-year yields fell to three-week lows,
while those on two-year notes slid to two-week troughs.
    Trump called his latest move retaliation for China's
decision to raise tariffs on $50 billion in U.S. goods, which
came after Trump announced similar tariffs on Chinese goods on
    "This trade war is driving the risk-off mode," said Gennadiy
Goldberg, interest rates strategist, at TD Securities in New
    U.S. benchmark 10-year yields fell to a three-week low of 
2.853 percent, from Monday's 2.926 percent. They
were last at 2.878 percent.
    U.S. 30-year yields dropped to 2.991 percent, a
three-week low as well, compared with 3.055 percent on Monday,
and were last at 3.014 percent.
    On the short end of the curve, U.S. two-year yields sank to
a two-week low of 2.496 percent, compared with 2.558
percent late on Monday. Two-year yields last traded at 2.524
    The yield curve, meanwhile, continued to steepen on Tuesday,
at least with respect to the spread between U.S. 5-year notes
and 30-year bonds. That spread narrowed to 26.90 basis points
    "A bull steepener is totally expected because a trade war is
said to cause stagflation, which could prevent the Federal
Reserve from further hiking rates," said TD's Goldberg. 
    June 19 Tuesday 9:04AM New York / 1304 GMT
 US T BONDS SEP8               144-10/32    0-24/32   
 10YR TNotes SEP8              119-240/256  0-88/256  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.9          1.9358    0.009
 Six-month bills               2.075        2.1261    -0.003
 Two-year note                 99-244/256   2.5245    -0.034
 Three-year note               99-248/256   2.6359    -0.038
 Five-year note                99-252/256   2.7532    -0.046
 Seven-year note               100-52/256   2.8424    -0.048
 10-year note                  99-244/256   2.8803    -0.046
 30-year bond                  102-40/256   3.015     -0.040
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        27.00         0.50    
 U.S. 3-year dollar swap        23.00         0.25    
 U.S. 5-year dollar swap        14.50         0.00    
 U.S. 10-year dollar swap        6.50         0.00    
 U.S. 30-year dollar swap       -6.50        -0.25    
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Frances Kerry)
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