May 21, 2019 / 7:45 PM / a month ago

TREASURIES-U.S. yields climb as stocks gain on Huawei news

    * U.S. existing home sales fall
    * U.S. eases trade restrictions on Huawei
    * Markets pare back U.S. rate cut outlook 

 (New throughout, updates prices, market activity and comments)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 21 (Reuters) - U.S. Treasury yields edged
higher on Tuesday, lifted by gains on Wall Street and higher
overall risk appetite after the United States eased trade
restrictions on Chinese telecommunications equipment maker
Huawei Technologies.
    The move helped calm fears of escalating trade tensions
between the United States and China, analysts said. 
    Federal Reserve officials made comments suggesting the U.S.
economy was more stable than many had thought, even with the
trade war. This reduced expectations of a near-term interest
rate cut, which fed selling on the short-end of the curve. U.S.
two-year yields hit two-week highs.
    Yields on U.S. benchmark 10-year notes and 30-year bonds
climbed to one-week peaks after Washington temporarily relaxed
trade restrictions on China's Huawei.
    Last week, the U.S. Commerce Department blocked Huawei
         from buying U.S. goods, citing national security.
    "Everything seems to be predicated on the next developments
with the trade talk," said Karissa McDonough, fixed income
strategist, at People's United Advisors in Burlington, Vermont.
"There has been some reprieve in terms of the technology
tariffs, but a reprieve does necessarily mean we have made
substantial progress."
    In late trading, U.S. 10-year note yields rose to 2.429%
 from 2.414% late on Monday, after hitting a one-week
high of 2.435%. 
    Yields on U.S. 30-year bonds advanced to 2.843%
from 2.835% on Monday. The session high was a one-week high of
2.849%.
    On the short end of the curve, U.S. 2-year yields rose to
2.26% from Monday's 2.223%.
    Boston Fed President Eric Rosengren said he did not expect
the trade issue will require looser U.S. monetary policy. This
assuaged some concerns about the possibility of a rate cut this
year. 
    "The rate cut outlook has been modestly lower," said Subadra
Rajappa, head of U.S. rates strategy at Societe Generale in New
York. "We were pricing in a 65 percent possibility of a rate cut
by October and now that's down to 50 percent."
    Yields briefly slipped after data showed U.S. home sales
unexpectedly fell in April amid persistent weakness in the
lower-priced segment. 
    Data showed existing home sales fell 0.4% to a
seasonally-adjusted annual rate of 5.19 million units last
month. March's sales pace was unrevised at 5.21 million units.

    
      May 21 Tuesday 3:24 PM New York / 1924 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.34         2.3868    -0.004
 Six-month bills               2.35         2.4179    0.005
 Two-year note                 99-251/256   2.26      0.037
 Three-year note               99-196/256   2.2066    0.033
 Five-year note                100-22/256   2.2314    0.028
 Seven-year note               100-80/256   2.3259    0.022
 10-year note                  99-132/256   2.4299    0.016
 30-year bond                  100-160/256  2.8439    0.009
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.25        -0.50    
 spread                                               
 U.S. 3-year dollar swap         3.75        -0.25    
 spread                                               
 U.S. 5-year dollar swap         0.50        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -5.00         0.00    
 spread                                               
 U.S. 30-year dollar swap      -27.75         0.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Paul Simao and David Gregorio)
  
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