May 24, 2018 / 6:49 PM / in a month

TREASURIES-U.S. Treasury yields fall on North Korea concerns

 (Adds Trump comments, quote, updates prices)
    * Geopolitical concerns boost demand for U.S. bonds
    * Strong demand for $30 billion U.S. seven-year note sale
    * Federal Reserve meeting minutes seen as dovish

    By Karen Brettell
    NEW YORK, May 24 (Reuters) - U.S. Treasury yields fell on
Thursday on safety buying after President Donald Trump called
off a planned summit with North Korean leader Kim Jong Un and as
the Turkish lira renewed its decline.
    Trump cited Pyongyang's "open hostility," and warned that
the U.S. military was ready in the event of any reckless acts by
North Korea.
    Earlier on Thursday, North Korea repeated a threat to pull
out of the unprecedented summit with Trump next month and warned
it was prepared for a nuclear showdown with Washington if
necessary.             
    "Some of the move seemed to be more of a classic risk off
move on account of the North Korean headlines and the apparent
lack of cooperation going forward," said Jonathan Cohn, an
interest rate strategist at Credit Suisse in New York.
    Turkey's lira weakened more than 3 percent on Thursday,
giving up a large chunk of the gains it made after the central
bank raised interest rates by 300 points a day earlier, as
investors bet another hike would be needed to tame the sell-off.
            
    Investors are also focused on an effort by Italy’s coalition
parties to name a euroskeptic economist as economy minister.
            
    "It seems like the geopolitical backdrop is still something
that is causing a flight to quality in U.S. Treasuries," said
Tom di Galoma, a managing director at Seaport Global Holdings in
New York.
    Demand for U.S. bonds helped the Treasury sell $30 billion
in seven-year notes on Thursday to strong demand, the final sale
of $99 billion in coupon-bearing supply this week.
    The bid-to-cover ratio was the highest since January.
                         
    Dealers had taken a larger than usual share for the two
previous auctions, indicating that the market is struggling to
absorb some larger auction sizes.                          
    Bonds were also supported after minutes from the Federal
Reserve May meeting on Wednesday were seen as giving no new
clues that the U.S. central bank is likely to raise rates an
additional three times this year.             
    A number of Fed policymakers, including Chairman Jerome
Powell, have been keen to stress they will tolerate inflation
rising above the Fed's goal for a time without undue concern.
    An additional two rate hikes this year, including one in
June, are widely expected.

 (Reporting by Karen Brettell; editing by Diane Craft)
  
 
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