August 28, 2019 / 4:04 PM / a month ago

TREASURIES-U.S. 30-year bond yields fall to record low

    * U.S. to sell $41 bln 5-year fixed-rate notes at 1 p.m.
    * Inversion spreads across the U.S. yield curve 

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Aug 28 (Reuters) - U.S. Treasury yields fell on
Wednesday, with 30-year yields setting all-time lows, as fears
about a recession and trade tensions between China and the
United States stoked unrelenting demand for low-risk government
    Inversion is spreading across the U.S. yield curve, where
short-dated yields are running above long-dated ones, which has
also unsettled investors. 
    Yield curve inversion often precedes a recession.
    Investors added to their safe-haven holdings of Treasuries
as UK Prime Minister Boris Johnson sought to limit parliament's
opportunity to derail his Brexit plan by suspending the House of
Commons for around a month, starting in mid-September.

    "Curve flattening continues in the U.S. with the long bond
on fire, clearly assisted by large block trades," NatWest
Markets strategists wrote in a research note.
    Those big-size trades may have occurred in the London
session, they noted. 
    Secondary trading volume of U.S. Treasuries in Europe hit a
30-day high, according to MarketAxess/Trax.
    Treasury prices pared their gains as Wall Street erased
initial losses.
    While some fund managers view Treasuries as expensive, they
are hard pressed to make a case to sell them given the uncertain
outcome of the trade developments between Beijing and
    "It's hard to see where the endgame is with the trade
tensions," said James Barnes, director of fixed income at The
Bryn Mawr Trust Co. in Devon, Pennsylvania.
    The Federal Reserve is also monitoring the trade tensions in
its economic outlook.
    Interest rates futures implied traders fully expect the U.S.
central bank to lower key borrowing costs by at least a quarter
point at its Sept. 17-18 policy meeting, following up on its
first rate cut since 2008.
    Meanwhile, the Treasury Department sold $18 billion in
two-year floating-rate notes to solid demand.
    It will offer $41 billion in five-year fixed-rate debt
 at 1 p.m. (1700 GMT), part of this week's $113
billion of fixed-rate government note supply.
    At 11:41 a.m. (1541 GMT), the yields on 30-year government
bonds were 1.937%, down 2.4 basis points from late
on Tuesday. They hit an all-time low of 1.905% earlier
    The 30-year yield is below 3-month T-bill rates, which has
not happened since 2007.  
    As for the rest of the yield curve, the spread on
three-month T-bill rates over 10-year yields widened to as much
as 55 basis points, a level not seen since March 2007, while the
premium on 2-year yields above 10-year yields
increased to 6.5 basis points, according to Refinitiv and
Tradeweb data.
August 28 Wednesday 11:41AM New York / 1541 GMT
 US T BONDS SEP9               166-31/32    15/32     
 10YR TNotes SEP9              131-88/256   7/32      
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.955        1.9976    0.003
 Six-month bills               1.835        1.8779    -0.015
 Two-year note                 100          1.5       -0.028
 Three-year note               100-60/256   1.4188    -0.024
 Five-year note                101-204/256  1.3711    -0.021
 Seven-year note               102-248/256  1.423     -0.024
 10-year note                  101-120/256  1.466     -0.024
 30-year bond                  107-40/256   1.9342    -0.033
         YIELD CURVE           Last (bps)   Net       
 10-year vs 2-year yield       -3.60        1.70      
 30-year vs 5-year yield       56.30        -0.85     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        -1.00         1.50    
 U.S. 3-year dollar swap        -4.50         0.00    
 U.S. 5-year dollar swap        -6.75        -0.75    
 U.S. 10-year dollar swap      -10.25        -1.00    
 U.S. 30-year dollar swap      -40.50        -1.00    
 (Additional reporting from Dhara Ranasinghe in London; editing
by Jonathan Oatis and Chris Reese)
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