August 14, 2017 / 3:18 PM / 2 years ago

TREASURIES-U.S. yields edge up as U.S.-North Korea tensions ease

    * U.S. yields rise from multi-week lows on reduced safety
bids
    * Trading volume light with dearth of economic data

 (Updates market action, quote)
    By Richard Leong
    NEW YORK, Aug 14 (Reuters) - U.S. Treasury yields edged
higher on Monday, with benchmark yields bouncing from six-week
lows as reduced tensions between the United States and North
Korea led investors to pare their holdings of low-risk
government debt.
    Last week, fears of a military showdown between the two
nations over Pyongyang's goal to target the U.S. mainland with
nuclear weapons caused a rush into Treasuries, yen, Swiss franc
and gold.
    Since the weekend, South Korean President Moon Jae-in urged
for a peaceful solution to the situation, while U.S. National
Security Adviser H.R. McMaster downplayed a military conflict.

    After those comments, some investors stepped back into the
stock market and other risky assets, reducing the appeal of
lower-yielding investments.
    "Risk is back on. That's the trade of the day," said Justin
Hoogendoorn, head of fixed income strategy and analytics at
Piper Jaffray in Chicago.
    The S&P 500 and Nasdaq gained 1 percent while the Dow
climbed 0.7 percent in morning trading on Monday.
    Most analysts remained wary that the rhetoric from U.S.
President Donald Trump and North Korean leader Kim Jon Un could
heat up again, rekindling investor nervousness about a military
showdown.
    "Tensions might flare up again. This is not the last we are
going to hear of this situation," Hoogendoorn said.
    Trading volume was light in the absence of major domestic
economic data, analysts said.
    At 11:08 a.m. (1508 GMT), the yield on benchmark 10-year
Treasury notes was 2.208 percent, up 2 basis points
from late on Friday. On Friday, it had hit a six-week trough at
2.182 percent.
    Two-year Treasury yields edged up 1 basis point
to 1.306 percent. 
    Two-year yields hit an eight-week low of 1.286 percent on
Friday after softer-than-expected inflation data for July
lowered expectations the Federal Reserve would raise interest
rates by year end.
August 14 Monday 11:07AM New York / 1507 GMT
                               Price                  
 US T BONDS SEP7               155-10/32    -0-5/32   
 10YR TNotes SEP7              126-168/256  -0-40/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.0225       1.0392    0.000
 Six-month bills               1.12         1.1418    0.000
 Two-year note                 100-34/256   1.306     0.012
 Three-year note               100-30/256   1.4599    0.016
 Five-year note                100-140/256  1.7593    0.018
 Seven-year note               100-172/256  2.021     0.022
 10-year note                  100-100/256  2.2063    0.019
 30-year bond                  99-12/256    2.7972    0.010
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        25.75         0.00    
 spread                                               
 U.S. 3-year dollar swap        20.50         0.25    
 spread                                               
 U.S. 5-year dollar swap         7.75        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -4.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -33.25         0.25    
 spread                                               
 
    

 (Reporting by Richard Leong; Editing by Chizu Nomiyama and
Meredith Mazzilli)
  
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