January 14, 2019 / 5:51 PM / 8 days ago

TREASURIES-U.S. yields drift higher as equities cut losses

    * Trump not declaring national emergency amid shutdown
    * Treasury prices rise earlier on poor Chinese, euro zone
data
    * No real issues in shutdown except those from
politicians-analyst

 (Recasts, adds comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 14 (Reuters) - U.S. Treasury yields turned
higher on Monday, after trading mostly lower, as risk sentiment
improved after President Donald Trump said he was not looking to
declare a national emergency amid a partial government shutdown.
    Earlier in the session, yields on U.S. 10-year and 2-year
notes fell to one-week lows, after poor Chinese and European
data.
    "Risk sentiment has been recovering all morning and to a
certain extent equities have been retracing some of their
losses," said Gennadiy Goldberg, U.S. rates strategist at TD
Securities in New York.
    "This could be related to headlines that Trump is not
looking to declare a national emergency," he added. Investors
less concerned about risk find other assets more attractive
compared to the safety of Treasury securities.  
    The U.S. government shutdown dragged on for a 24th straight
day over an impasse on building Trump's border wall that he said
is meant to protect the country against illegal immigrants and
drugs.
    Trump can declare a national emergency because of the
shutdown but on Monday he said he is not looking to do that.

    Still the shutdown has caused worry for many investors.
    "As the U.S. government partial shutdown lengthens,
prospects for market relief at its eventual conclusions are now
dimmer," said Jim Vogel, interest rates strategist at FTN
Financial in Memphis, Tennessee.
    "The more circular the arguments became last week, the
clearer it became that the fight is about who is going to give
in and why. Investors don't see real issues at stake other than
those of opposing politicians."   
    In midday trading, U.S. 10-year note yields rose to 2.706
percent, up from 2.699 percent late on Friday.
    U.S. 30-year bond yields, were also up at 3.053 percent
, from 3.036 percent on Friday.
    On the short end of the curve, U.S. 2-year yields were still
slightly down on the day at 2.538 percent, compared with
Friday's 2.545 percent.
    Treasury yields fell earlier in the session after data from
China showed imports fell 7.6 percent year-on-year in December,
compared with market forecasts for a 5 percent rise. Exports
dropped 4.4 percent, compared with expectations for a 3 percent
gain. That started a sell-off in stocks.
    Euro zone data also disappointed on Monday, as the region's
industrial output fell in November by more than expected,
dropping 1.7 percent after a modest, downwardly revised 0.1
percent increase in October and a 0.6 percent drop in September.

    The European data was consistent with reports that raised
concerns about the region's growth in the final quarter of the
year.
    Germany's 10-year government bond yield, the euro zone
benchmark, earlier slid after the euro zone data, but was last
up at 0.234 percent, from Friday's close of 0.232
percent.
    
      January 14 Monday 12:34PM New York / 1734 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.375        2.4217    -0.002
 Six-month bills               2.445        2.5091    0.000
 Two-year note                 99-238/256   2.5367    -0.008
 Three-year note               99-246/256   2.5136    -0.002
 Five-year note                100-116/256  2.5271    0.002
 Seven-year note               100-48/256   2.5953    0.001
 10-year note                  103-152/256  2.706     0.007
 30-year bond                  106-80/256   3.051     0.015
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        16.25         1.25    
 spread                                               
 U.S. 3-year dollar swap        12.50         1.50    
 spread                                               
 U.S. 5-year dollar swap         9.00         0.75    
 spread                                               
 U.S. 10-year dollar swap        2.50         0.50    
 spread                                               
 U.S. 30-year dollar swap      -19.75        -0.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-DreyfussEditing by Susan Thomas
and Cynthia Osterman)
  
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