December 4, 2019 / 3:46 PM / 12 days ago

TREASURIES-Hanging on Trump's words, U.S. Treasury yields rise on trade outlook

    By Ross Kerber
    BOSTON, Dec 4 (Reuters) - U.S. Treasury yields rose on
Wednesday on a more positive outlook for a trade deal with China
and showing the market zeroed in on slight changes in comments
from U.S. President Donald Trump.
    The benchmark 10-year yield was up 5.8 basis
points to 1.768% in morning trade, part of a broader enthusiasm
for risk globally.
    Trump said on Wednesday that talks with China were going
"very well," speaking at a meeting of NATO leaders near London.
His remarks were taken as a contrast with comments he made on
Tuesday, which raised the prospect of a long extension of trade
tensions between the world's two biggest economies.
    In response, U.S. yields had fallen and at one point the
10-year was at its lowest since May of 2018. Wednesday's
turnaround showed investors treating Trump's remarks with the
same sensitivity they apply to the words of U.S. Federal Reserve
officials speaking about interest rates, said Tony Bedikian,
head of global markets for Citizens Bank.
    "It's similar to Fedspeak," he said. At the same time he
said investors are probably overly focused on the presidential
remarks since 10-year yields have traded in the range of 1.5% to
2% since October.
    "Right now we are mired in this range, and we need some more
definitive results coming out of the trade talks" before 10-year
yields would again exceed 2%, he said. 
    The increases also showed traders shrugging off some
economic news. U.S. private-sector job growth unexpectedly
slowed to its weakest pace in six months in November, and goods
producers and construction firms cut jobs, a private survey said
on Wednesday.
    The two-year yield, typically seen as indicator of interest
rate expectations, rose 3.8 basis points to 1.570% in morning
trading. The spread between the two- and 10-year yields
 widened 1.75 basis points. 
    The movement suggested investors overall expect the U.S.
central bank to hold interest rates unchanged "for the
foreseeable future," Bedikian said.   
    Also on Wednesday the Bank of Canada held its overnight rate
at 1.75% as expected and cited early signs the global economy
was stabilizing.
    
      December 4 Wednesday 10:17AM New York / 1517 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5475       1.5795    0.000
 Six-month bills               1.5375       1.5754    -0.006
 Two-year note                 99-222/256   1.5681    0.036
 Three-year note               100-38/256   1.5731    0.043
 Five-year note                99-154/256   1.5834    0.049
 Seven-year note               99-140/256   1.694     0.050
 10-year note                  99-220/256   1.7654    0.056
 30-year bond                  103-84/256   2.2222    0.062
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         1.25         0.00    
 spread                                               
 U.S. 3-year dollar swap        -2.75         0.50    
 spread                                               
 U.S. 5-year dollar swap        -3.00         0.25    
 spread                                               
 U.S. 10-year dollar swap       -7.75         0.25    
 spread                                               
 U.S. 30-year dollar swap      -34.00         0.25    
 spread                                               
 
 (Reporting by Ross Kerber, Editing by Andrea Ricci)
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