August 30, 2017 / 6:58 PM / a year ago

TREASURIES-Geopolitical concerns keep U.S. bonds bid, despite solid data

 (Recasts with North Korean concerns, adds quote, updates
    * Geopolitical, debt ceiling concerns in focus
    * Strong U.S. economic data keeps December rate hike on

    By Karen Brettell
    NEW YORK, Aug 30 (Reuters) - U.S. Treasury yields held near
nine-month lows on Wednesday as concerns about rising tensions
with North Korea kept a bid for the bonds, and offset data that
showed solid economic momentum.
    "Geopolitical events are really the focus, combined with the
unfolding drama here with Washington,” said Ian Lyngen, head of
U.S. rates strategy at BMO Capital Markets in New York. “I
struggle to think that anyone is going to want to go home short
the Treasury market into the holiday weekend.”
    President Donald Trump on Wednesday said "talking is not the
answer" to the tense standoff with North Korea over its nuclear
missile development, but his defense chief swiftly asserted that
the United States still has diplomatic options.             
    The comment comes a day after Pyongyang fired a ballistic
missile over Japan, which sent benchmark 10-year Treasury yields
as low as 2.086 percent on Tuesday, the lowest since Nov. 10.
    The 10-year notes             were last down 3/32 in price
to yield 2.145 percent, up from 2.136 percent on Tuesday.
    Concerns about geopolitical tensions and demand for bonds to
balance portfolios for month-end extension is expected to
support bond prices this week.
    Investors are also nervous about the prospect of a
government shutdown, and potential debt default, if lawmakers
don’t raise the nation’s debt ceiling by the end of September.
    Trump will address tax reform on Wednesday in a speech
expected to tout tax cuts as a way to help workers and the
middle class.             
    Expectations that the Trump administration will overhaul
taxes, potentially boosting growth, have faltered in recent
months as lawmakers have been unable to pass healthcare and
other legislation.
    Data on Wednesday showed economic strength and kept alive
the possibility that the Federal Reserve will raise interest
rates again at its December meeting.
    Gross domestic product increased at a 3.0 percent annual
rate in the April-June period, the strongest since the first
quarter of 2015.             
    U.S. private employers also added 237,000 jobs in August,
the biggest monthly increase in five months, beating economists'
    Personal income figures on Thursday and Friday’s employment
report for August are the next major U.S. economic releases.
    Investors are also evaluating whether Tropical Storm Harvey
is likely to have a lasting impact on the U.S. economy after
bringing catastrophic flooding to Texas.             

 (Editing by Chizu Nomiyama)
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