May 23, 2019 / 2:12 PM / a month ago

REFILE-TREASURIES-U.S. yields tumble on trade war fears, growth worries

 (Adds dropped word "know" in 5th paragraph)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 23 (Reuters) - U.S. Treasury yields dropped
across the board on Thursday as risk appetite diminished on
continued concerns about global growth and the worsening trade
conflict between the United States and China.
    U.S. 30-year bond yields sank to roughly 16-month lows,
while those on benchmark 10-year notes fell to their lowest
level since December 2017, as shares around the world took a
nose dive.
    In another sign of growing market anxiety, two yield curve
indicators briefly inverted on Thursday.
    "A lot of these has to do with growth concerns and the
potential for this trade war not to end," said Ellis Phifer,
market strategist at Raymond James in Memphis, Tennessee.
    "We are in risk-off mode ahead of this weekend because we
don't know what's going to happen. The tensions are still too
high and we had weekends before filled with additional news," he
added.
    Investors worried that this raging U.S.-China trade spat
could intensify and further undermine global growth. 
    China on Thursday called out the United States, saying it
needs to correct its "wrong actions" for trade talks to continue
after it blacklisted Chinese telecommunications equipment maker
Huawei Technologies.
    In mid-morning trading, U.S. 10-year note yields fell to
2.332% from 2.393% late on Wednesday, after earlier
sliding to 2.327%, its lowest since December 2017.
    Technical charts suggest the break of support in the 2.338%
area on the 10-year could see the note drop to the 2.28% region,
Action Economics said.
    Yields on U.S. 30-year bonds slid to 2.766% from
2.819% on Wednesday. Thirty-year yields earlier slumped to
2.762%, a 16-month low.
    On the short end of the curve, U.S. 2-year yields were down
at 2.17% from Wednesday's 2.231%.
    Two yield curve measures briefly inverted. The gap in yield
between U.S. 3-month and 10-year notes, as well as that between
2-year and 5-year notes fell, suggesting
expectations of slower economic growth.
    "The 2s/5s inversion is in mini-panic mode, one reason to
term this morning a risk-off move even though it has its
rationale in fundamentals more than events," said Jim Vogel,
senior rates strategist, at FTN Financial in Memphis, Tennessee.
    "In this case, events are a contributor," he added.
    Britain's trouble-plagued attempt to leave the European
Union has also helped boost U.S. bond prices.
    Prime Minister Theresa May tenuously held on to power on
Thursday after her final Brexit gambit backfired. May's
departure will deepen the Brexit crisis as a new leader is
likely to want a more decisive split.
    U.S. yields fell as well after a pair of U.S. economic data
-- manufacturing activity, new home sales -- showed weakness.

    
      May 23 Thursday 10:03AM New York / 1403 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.315        2.3608    -0.017
 Six-month bills               2.3375       2.4047    -0.002
 Two-year note                 100-40/256   2.1667    -0.064
 Three-year note               100-16/256   2.1031    -0.068
 Five-year note                100-154/256  2.1208    -0.068
 Seven-year note               101          2.2185    -0.066
 10-year note                  100-96/256   2.3326    -0.060
 30-year bond                  102-60/256   2.7648    -0.054
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.25        -0.25    
 spread                                               
 U.S. 3-year dollar swap         3.50        -0.50    
 spread                                               
 U.S. 5-year dollar swap         0.50        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -5.00        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -28.50        -0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)
  
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