TREASURIES-U.S. Treasury yields fall on mixed economic signals

 (Updates with market activity, analyst comment)
    By Ross Kerber
    BOSTON, Dec 19 (Reuters) - U.S. Treasury yields fell on
Thursday as traders weighed mixed economic signals on recent
domestic labor market and business conditions.
    The benchmark 10-year yield was down 1.9 basis
points at 1.9047% in afternoon trading, after rising as high as
    Yields fell back after the U.S. Labor Department said the
number of Americans filing applications for unemployment
benefits dropped from more than a two-year high last week.
    While the report pointed to sustained labor market strength,
initial claims for state unemployment benefits were higher than 
economists had forecast.
    The figures drew traders' attention away from more positive
long-term trends, said James Barnes, director of fixed income at
Bryn Mawr Trust.
    "The recent attention on trade and global central policy
shifted a little this morning" based on the jobs report, he
    Investors remained positive overall with stock indexes
hitting new highs after U.S. Treasury Secretary Steven Mnuchin
said an initial U.S.-China trade deal would be signed in early
    In a separate report on Thursday, the Philadelphia Federal
Reserve said its business conditions index dropped to a reading
of 0.3 in December from 10.4 in November. But there were
increases in measures of new orders, unfilled orders, factory
hours and shipments. 
    In addition, U.S. home sales dropped more than expected in
November due to an ongoing shortage of properties for sale,
despite the sector receiving an overall boost from the Federal
Reserve's decision to cut interest rates this year, according to
a report from the National Association of Realtors.
    In a Wall Street Journal interview published on Thursday
James Bullard, president of the Federal Reserve Bank of St.
Louis, said he sees no reason now to change rates in 2020.

    Bullard's comments drove down the two-year yield,
which typically moves in step with interest rate expectations.
It fell 1.6 basis points to 1.6166% in afternoon trading.
    The U.S. yield curve, measured as the difference between the
yields on two- and 10-year Treasury notes, was at 28.6 basis
points in midday trading, just above Wednesday's close of 28.4.
At one point, it reached as high as 31 basis points, its widest
since October 2018.
    Mary Ann Hurley, vice president at D.A. Davidson, said
Bullard's comments were in line with those of other Fed
officials recently, and offset data that largely consisted of
lagging indicators. Light volumes on the day could have
magnified the market impact of trades, she said.
    Hurley said the Fed could find it easier to lower rates than
raise them in its future decision-making.
    "With all the excess capacity worldwide I can't see
inflationary pressures" arising quickly, she said.
  December 19 Thursday 2:00PM New York / 1900 GMT Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.5325       1.564     0.005
 Six-month bills               1.5325       1.5701    -0.005
 Two-year note                 99-199/256   1.6166    -0.016
 Three-year note               99-242/256   1.6438    -0.027
 Five-year note                98-250/256   1.7167    -0.021
 Seven-year note               98-160/256   1.8367    -0.019
 10-year note                  98-156/256   1.9047    -0.019
 30-year bond                  100-176/256  2.3428    -0.008
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         7.00         0.25    
 U.S. 3-year dollar swap         2.75         0.75    
 U.S. 5-year dollar swap        -1.00         0.00    
 U.S. 10-year dollar swap       -5.25         0.00    
 U.S. 30-year dollar swap      -30.25        -0.25    

 (Editing by David Gregorio and Bill Berkrot)