TREASURIES – U.S. Yields Hold Firm Amid Trade Uncertainties
* U.S. to sell $113 bln in fixed-rate, coupon-bearing debt
* U.S. durable goods orders unexpectedly rise in July
(Updates market action, changes dateline, previous LONDON)
NEW YORK, Aug 26 (Reuters) – U.S. Treasury yields held steady on Monday, bouncing off multi-year lows, as uncertainties over trade developmentsÂ between China and the United States underpinned safe-haven demand for low-risk government bonds.
Benchmark 10-year Treasury yields slid to 1.443% earlier Monday, their lowest since July 2016, in the wake of another round of tit-for-tat tariffs between the world’s biggest economies last week.
On Friday, U.S. President Donald Trump announced an additional duty on some $550 billion of targeted Chinese goods, hours after China unveiled retaliatory tariffs on $75 billion worth of U.S. goods.
By Monday, Trump and Chinese leaders sought to ease trade tensions that triggered steep stock market sell-offs around the world.
“Tough call at this point. In the end, short-term actions speak louder than words. And the most recent actions on both sides was not constructive and continues to weigh on sentiment,” said Greg Faranello, head of U.S. rates at AmeriVet Securities.
The trade war between China and the United States has put the Federal Reserve in a tough spot as policymakers have cited its disruption in global business activities as a risk to the domestic economy.
On Friday, Fed Chair Jerome Powell said the central bank would “act as appropriate” to sustain the longest-ever U.S. economic expansion, but he did not make a pledge it was ready to embark on a series of interest rate cuts.
Interest rates futures implied traders expect the Fed to lower rates by a quarter point at its Sept. 17-18 policy meeting, following its first rate decrease since 2008 in July.
Fed funds contracts suggested the Fed would cut rates at least one more time after September, CME Group’s FedWatch program showed.
On the data front, domestic orders for durable goods unexpectedly rose in July but shipments fell by the most in nearly three years, suggesting capital investment remained sluggish.
Meanwhile, the U.S. Treasury will sell $113 billion in fixed-rate debt supply this week, starting with a $40 billion auction of two-year notes on Tuesday.
On the open market, the yields on two-year notes had fallen to 1.449%, their lowest since September 2017 at 1.449%. They moved up to 1.527%, down 0.20 basis point. Ten-year Treasury yields were 1.532%, little changed on the day, rebounding from a three-year low of 1.443% set earlier Monday. The spread between two-year and 10-year yields turned positive with a recovery in U.S. stock index futures. It was inverted earlier at -1.2 basis points.
August 26 Monday 9:20AM New York / 1320 GMT Price US T BONDS SEP9 165-15/32 -2/32 10YR TNotes SEP9 130-232/256 -2/32 Price Current Net Yield % Change (bps) Three-month bills 1.945 1.9866 0.023 Six-month bills 1.8475 1.8955 0.025 Two-year note 100-108/256 1.5267 -0.002 Three-year note 100-38/256 1.4487 0.000 Five-year note 101-156/256 1.4106 0.002 Seven-year note 102-160/256 1.4749 0.002 10-year note 100-220/256 1.5317 0.005 30-year bond 105-28/256 2.0218 -0.002
YIELD CURVE Last (bps) Net Change (bps) 10-year vs 2-year yield 0.30 0.30 30-year vs 5-year yield 60.90 0.25
DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap -1.00 0.75 spread U.S. 3-year dollar swap -3.50 0.25 spread U.S. 5-year dollar swap -5.50 0.25 spread U.S. 10-year dollar swap -8.50 0.75 spread U.S. 30-year dollar swap -38.75 1.25 spread
(Reporting by Richard Leong in New York and Dhara Ranasinghe in LONDON; Editing by Thyagaraju Adinarayan andn Steve Orlofsky)