February 8, 2019 / 3:52 PM / 9 days ago

TREASURIES-U.S. yields down for 4th day on U.S.-China trade woes

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Feb 8 (Reuters) - U.S. Treasury yields fell for a
fourth straight session on Friday, weighed down by global equity
market losses on concerns that there would be no trade deal
between the United States and China by the March 1 deadline.
    U.S. 30-year yields dropped to one-month lows, while those
on two-year and 10-year notes slid to one-week troughs.
    "This is partially from an equity sell-off that has been a
little bit of a risk-off trade," said Ellis Phifer, fixed-income
strategist at Raymond James in Memphis, Tennessee.
    "We have the China trade talks, but we haven't really seen 
success at this point. Suddenly the bond market is taking its
clues from that."
    U.S. President Donald Trump said on Thursday he did not plan
to meet with Chinese President Xi Jinping before a March 1
deadline set by the two countries to achieve a trade deal.  
    A person briefed on the talks said Trump's advisers were
concerned that accepting a meeting invitation at this stage
would raise unfounded expectations for a quick deal and erode
U.S. leverage in the talks, where the two sides remain far apart
on core structural intellectual property issues.
    In mid-morning trading, U.S. 10-year note yields fell to
2.635 percent, from 2.654 percent late on Thursday.
    U.S. 30-year bond yields were also down, at 2.985 percent
, from 3.006 percent on Thursday. Thirty-year yields
earlier fell to a one-month low of 2.976 percent.
    On the short end of the curve, U.S. 2-year yields slipped 
to 2.458 percent, compared with Thursday's 2.479 percent
.
    Jim Vogel, interest rates strategist at FTN Financial in
Memphis, noted that this week's steady decline in yields is not
being accompanied by widespread buying support.
    "That missing ingredient leaves bond prices vulnerable to a
gap higher on either a news jolt or a cumulative run of data
that don't meet expectations. A thin rally usually invites
profit-taking, but bears can't find momentum for falling bond
prices either," Vogel said.
    U.S. yields were also tracking those on Germany's 10-year
government bonds, which dropped below 0.1 percent for the first
time since late 2016 on Friday, reflecting concerns about
economic conditions in the euro zone's largest economy.

    The 10-year Bund yield fell as low as 0.097 percent
, dragging French and Dutch yields to their lowest
levels in more than two years,. 
    
      February 8 Friday 10:38AM New York / 1538 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.3775       2.4244    0.012
 Six-month bills               2.425        2.4885    0.003
 Two-year note                 100-20/256   2.4589    -0.020
 Three-year note               100-50/256   2.4321    -0.019
 Five-year note                100-74/256   2.4378    -0.020
 Seven-year note               100-158/256  2.5278    -0.017
 10-year note                  99-232/256   2.6357    -0.018
 30-year bond                  100-68/256   2.9865    -0.020
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        14.75         0.75    
 spread                                               
 U.S. 3-year dollar swap        11.50         0.50    
 spread                                               
 U.S. 5-year dollar swap         9.00         0.00    
 spread                                               
 U.S. 10-year dollar swap        2.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -19.50        -0.75    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)
  
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