* Trump on China: "I think they want to make a deal very
badly"
* U.S. to sell $113 bln in fixed-rate, coupon-bearing debt
* U.S. durable goods orders unexpectedly rise in July
(Updates market action to U.S. midday)
By Richard Leong
NEW YORK, Aug 26 (Reuters) - U.S. Treasury yields held
steady on Monday, bouncing off multi-year lows as uncertainties
over trade developments between China and the United States
underpinned safe-haven demand for low-risk government bonds.
Benchmark 10-year Treasury yields slid to 1.443% earlier on
Monday, their lowest since July 2016, in the wake of another
round of tit-for-tat tariffs between the world's biggest
economies last week.
On Friday, U.S. President Donald Trump announced an
additional duty on some $550 billion of targeted Chinese goods,
hours after China unveiled retaliatory tariffs on $75 billion
worth of U.S. goods.
By Monday, Trump and Chinese leaders sought to ease trade
tensions that triggered steep stock market sell-offs around the
world. Trump told a press conference after the G7 summit in
France: "I think they want to make a deal very badly."
Analysts were not as optimistic.
"Tough call at this point. In the end, short-term actions
speak louder than words. And the most recent actions on both
sides was not constructive and continues to weigh on sentiment,"
said Greg Faranello, head of U.S. rates at AmeriVet Securities.
The trade war between China and the United States has put
the Federal Reserve in a tough spot as policymakers have cited
its disruption of global business activities as a risk to the
domestic economy.
On Friday, Fed Chair Jerome Powell said the central bank
would "act as appropriate" to sustain the longest-ever U.S.
economic expansion. But he did not pledge that the Fed was ready
to embark on a series of interest rate cuts.
Interest rates futures implied traders expect the Fed to
lower rates by a quarter point at its Sept. 17-18 policy
meeting, following its first rate decrease since 2008 in July.
Fed funds contracts suggested the Fed would cut rates at
least one more time after September, CME Group's FedWatch
program showed.
On the data front, domestic orders for durable goods
unexpectedly rose in July but shipments fell by the most in
nearly three years, suggesting capital investment remained
sluggish.
The U.S. Treasury will sell $113 billion in fixed-rate debt
supply this week, starting with a $40 billion auction of
two-year notes on Tuesday.
On the open market, yields on two-year notes fell
as low as 1.449%, their lowest since September 2017. They
subsequently moved up to 1.545%, up 1.60 basis point.
Ten-year Treasury yields were 1.5331.532%,
marginally higher on the day, rebounding from a three-year low
of 1.443% set earlier on Monday.
The spread between two-year and 10-year yields
turned positive with a recovery in U.S. stock
index futures. It was inverted earlier at -1.7 basis points.
The three major Wall Street stock indexes were up nearly 1%
in midday U.S. trading.
August 26 Monday 12:36PM New York / 1636 GMT
Price
US T BONDS SEP9 165-13/32 -4/32
10YR TNotes SEP9 130-232/256 -2/32
Price Current Net
Yield % Change
(bps)
Three-month bills 1.9525 1.9943 0.030
Six-month bills 1.84 1.8877 0.018
Two-year note 100-101/256 1.5412 0.012
Three-year note 100-32/256 1.4567 0.008
Five-year note 101-152/256 1.4139 0.005
Seven-year note 102-160/256 1.4749 0.002
10-year note 100-220/256 1.5317 0.005
30-year bond 104-244/256 2.0286 0.005
YIELD CURVE Last (bps) Net
Change
(bps)
10-year vs 2-year yield -1.10 -1.20
30-year vs 5-year yield 61.20 0.60
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap -1.75 0.00
spread
U.S. 3-year dollar swap -3.75 0.00
spread
U.S. 5-year dollar swap -5.50 0.25
spread
U.S. 10-year dollar swap -8.75 0.50
spread
U.S. 30-year dollar swap -39.50 0.50
spread
(Reporting by Richard Leong in New York and Dhara Ranasinghe in
LONDON; Editing by Thyagaraju Adinarayan, Steve Orlofsky and
Dan Grebler)
