August 28, 2019 / 1:23 PM / 19 days ago

TREASURIES-U.S. 30-year bonds 'on fire,' sends yields to record low

 (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 have stoked unrelenting demand for low-risk
government debt.
    The inversion of the U.S. yield curve, where short-dated
yields are running above long-dated ones, has also unsettled
investors, as it 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 Brexit 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. 
    Meanwhile, the Treasury Department will hold two auctions
later Wednesday: $18 billion in two-year floating-rate notes at
11:30 a.m. (1530 GMT) and $41 billion in five-year fixed-rate
debt at 1 p.m. (1700 GMT).
    At 9:07 a.m. (1307 GMT), the yields on 30-year government
bonds were 1.916%, down 3.6 basis points from late
on Tuesday. They hit an all-time low of 1.49% earlier Wednesday.

    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 55 basis
points, a level not seen since March 2007, while the premium on
2-year yield above 10-year yield yields increased
to 6.5 basis points, according to Refinitiv and Tradeweb data.
August 28 Wednesday 9:10AM New York / 1310 GMT
                               Price                  
 US T BONDS SEP9               167-11/32    27/32     
 10YR TNotes SEP9              131-100/256  8/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.955        1.9976    0.003
 Six-month bills               1.84         1.8831    -0.010
 Two-year note                 99-255/256   1.502     -0.026
 Three-year note               100-60/256   1.4188    -0.024
 Five-year note                101-208/256  1.3678    -0.024
 Seven-year note               103-4/256    1.416     -0.031
 10-year note                  101-148/256  1.4542    -0.036
 30-year bond                  107-156/256  1.915     -0.052
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       -4.90        0.45      
 30-year vs 5-year yield       54.60        -2.40     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -1.50         1.00    
 spread                                               
 U.S. 3-year dollar swap        -5.00        -0.50    
 spread                                               
 U.S. 5-year dollar swap        -7.00        -1.00    
 spread                                               
 U.S. 10-year dollar swap      -10.50        -1.25    
 spread                                               
 U.S. 30-year dollar swap      -40.50        -1.00    
 spread                                               
 
    

 (Additional reporting from Dhara Ranasinghe in London; editing
by Jonathan Oatis)
  
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