March 22, 2018 / 6:18 PM / 8 months ago

TREASURIES-Trade war fears boost demand for Treasuries

 (Adds tariff details, quote; updates prices)
    * Trump signs plan to impose tariffs on Chinese imports
    * Bank of England keeps rates steady

    By Karen Brettell
    NEW YORK, March 22 (Reuters) - U.S. Treasury prices gained
on Thursday on rising risk aversion as President Donald Trump
signed a presidential memorandum on Thursday that could impose
tariffs on up to $60 billion of imports from China.
    Under the terms of the memorandum, Trump will target the
Chinese imports only after a consultation period, a measure that
will give industry lobbyists and legislators a chance to water
down a proposed target list which runs to 1,300
    "There seems to be too much uncertainly about what all these
trade tariffs are going to lead to,” said Tom di Galoma, a
managing director at Seaport Global Holdings in New York. 
    Benchmark 10-year notes             gained 18/32 in price to
yield 2.841 percent, down from 2.907 percent on Wednesday.
    The yield curve between two-year and 10-year notes
               flattened to 55 basis points from 58 basis
    Declining stocks boosted demand for lower-risk bonds.
    Concerns about a more hawkish Federal Reserve also eased
after the U.S. central bank on Wednesday raised interest rates
and forecast two more hikes for 2018, instead of the three that
many market participants had expected.
    "The Fed didn’t really surprise yesterday. Some people were
looking for 2018 to be possibly four rate hikes, and it’s still
a possibility, but for now it just keeps the status quo," said
Justin Lederer, an interest rate strategist at Cantor Fitzgerald
in New York.
    Policymakers were largely split as to whether a total of
three or four rate hikes would be needed this year in their rate
projections, known as the “dot plot” because the outlooks are
plotted on a chart.             
    Some of Thursday's rally was also driven by investors that
had bet on higher yields after the Fed meeting covering their
positions, said Lederer.
    The Bank of England kept rates steady on Thursday but two of
its policymakers unexpectedly voted for an immediate rate rise,
in a statement that will boost investors' confidence that
borrowing costs will rise in May.             

 (Editing by Lisa Shumaker)
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