November 6, 2019 / 7:39 PM / 13 days ago

TREASURIES-Bond sell-off pauses, U.S.-China trade deal in focus

 (Adds comments from Fed's Williams, auction results, updates
prices)
    * Treasury prices gain after three days of selling 
    * Report that U.S.-China trade meeting delayed
    * Treasury sells $27 bln 10-year notes to strong demand

    By Karen Brettell
    NEW YORK, Nov 6 (Reuters) - U.S. Treasury prices gained on
Wednesday on a report that a U.S.-China meeting to sign a trade
deal could be delayed until December, while some investors also
repositioned after a three-day sell-off.
    Reuters reported that the meeting between U.S. President
Donald Trump and Chinese President Xi Jinping could be pushed
back as discussions continue over terms and venue.             
    The report dented risk appetite, sending stocks lower and
boosting demand for safe haven U.S. government bonds.
    "Long term yields in particular are going to move with the
shifts in the trade situation," said Mike Schumacher, head of
rate strategy at Wells Fargo in New York.
    Benchmark 10-year notes             gained 16/32 in price to
yield 1.809%, down from 1.865% late Tuesday.
    The United States and China are working to narrow their
differences enough to sign a "phase one" agreement.             
    If the United States agrees to remove existing tariffs on
Chinese goods it would likely boost risk taking, and send
Treasury yields higher with 10-year note yields possibly heading
back above the key 2% level.
    "Getting back to 2-plus doesn't seem like much of a hurdle,
in particular if some of the tariffs get rolled back,"
Schumacher said.
    Bonds have weakened since Friday on optimism a deal will be
reached, and after data showed job growth slowed less than
expected in October while wages rose.             
    A stronger-than-expected service sector report on Tuesday
reinforced the view that the U.S. economy is solid, and that the
Federal Reserve is unlikely to continue cutting rates in the
near-term, after making three rate cuts this year.             
    New York Federal Reserve President John Williams said
Wednesday any interest rate changes will depend on upcoming
economic data.             
    After three days of losses, bonds are also likely being
supported by investor repositioning.
    "We have been down quite a number of days in a row and there
is maybe a little bit of short covering going on here," said
Mary Ann Hurley, vice president in fixed income trading at D.A.
Davidson in Seattle.
    The Treasury Department sold $27 billion in 10-year notes on
Wednesday to strong demand, the second sale of $84 billion in
new coupon-bearing supply this week.
    The government sold $38 billion in three-year notes on
Tuesday and will sell $19 billion of 30-year bonds on Thursday.
                         

 (Editing by Andrea Ricci and Richard Chang)
  
 
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