December 14, 2018 / 3:28 PM / 4 months ago

TREASURIES-Yields fall, in line with stocks, on global growth fears

    * Europe, China cast pall on global growth, weigh on yields
    * Strong U.S. core retail sales to erase gloom
    * Despite robust retail sales, spending could slow in
2019-analyst

 (Recasts, adds analyst comments, table, byline, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 14 (Reuters) - U.S. Treasury yields retreated
on Friday, in line with falls in U.S. equities, weighed down by
worries about global growth after poor economic numbers out of
Europe and China.
    U.S. long-dated yields slid after rising for four straight
sessions. On the week, however, their yields were still higher,
with benchmark 10-year notes up nearly 5 basis points.
    Yields, however, limited their fall following a surge in
U.S. core retail sales in November, somewhat easing concerns
about a potential downturn in the world's largest economy.
    But risk sentiment had already soured with the European and
Chinese data, and it was difficult to reverse the trend in
yields even with a strong U.S. number, analysts said.
    Data showed euro zone business ended the year on a weak
note, expanding at the slowest pace in over four years as new
order growth all but dried up, hurt by trade tensions and
violent protests in France, a survey showed.
   In China, November retail sales grew at the weakest pace
since 2003 and industrial output rose the least in nearly three
years, underlining risks to the economy.
    Global stock markets tumbled following the weak European and
Chinese data.
    "The weakness in stocks had something to do with the rise in
U.S. Treasury yields," said Lou Brien, market strategist, at DRW
Trading in Chicago.
    "It seems that relationship is more in tune lately because
Treasuries may be sniffing out that stocks may be indicating
economic weakness on the horizon," he added.
    In midmorning trading, U.S. 10-year note yields fell to 
2.896 percent from 2.911 percent late on Thursday.
    U.S. 30-year bond yields were also down at 3.152 percent
 from 3.148 percent on Wednesday.
    On the short end of the curve, U.S. 2-year yields traded
modestly lower at 2.749 percent, compared with Thursday's 2.76
percent.
    U.S. yields tempered their fall after data showed U.S.
retail sales excluding automobiles, gasoline, building materials
and food services rose 0.9 percent last month after an upwardly
revised 0.7 percent increase in October. Economists polled by
Reuters had forecast core retail sales rising 0.4 percent last
month.
    Andrew Hunter, senior U.S. economist at Capital Economics in
London, said the boost to real income from lower gasoline prices
and the continued strength in the labor market seemed to have
provided support to spending growth.
    But he noted that "with the earlier boost from tax cuts now
fading and rising interest rates likely to become an increasing
drag, we still expect consumption growth to slow next year."
    
      December 14 Friday 10:12AM New York / 1512 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.3675       2.4142    -0.006
 Six-month bills               2.485        2.5509    0.000
 Two-year note                 100-2/256    2.7455    -0.014
 Three-year note               99-174/256   2.7371    -0.022
 Five-year note                100-164/256  2.7357    -0.018
 Seven-year note               100-96/256   2.8151    -0.015
 10-year note                  101-248/256  2.8949    -0.016
 30-year bond                  104-76/256   3.152     -0.010
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        14.00         0.25    
 spread                                               
 U.S. 3-year dollar swap        12.00         0.25    
 spread                                               
 U.S. 5-year dollar swap        10.50         0.25    
 spread                                               
 U.S. 10-year dollar swap        3.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -14.75         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Chizu Nomiyama and Jonathan Oatis)
  
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