December 10, 2019 / 3:41 PM / a month ago

TREASURIES-U.S. yields edge higher on trade optimism

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 10 (Reuters) - U.S. Treasury yields rose on
Tuesday after trading lower for most of the overnight session,
as risk appetite improved amid  optimism that the Trump
administration could delay imposing tariffs on Chinese goods set
to take effect on Sunday.
    This is viewed as a positive development for ongoing
U.S.-China trade negotiations, as both sides try to forge a
preliminary agreement.
    The U.S. government's tariffs on about $160 billion in
Chinese goods are set to be applied on Dec 15. A Wall Street
Journal report earlier on Tuesday said U.S. and Chinese trade
negotiations are planning for a delay of the imposition of
tariffs.
    The report sent U.S. stocks and Treasury yields higher.
    "The headline on the possible delay of tariffs caused a
bounce in yields," said Michael Chang, interest rates strategist
at Societe Generale in New York. "Basically 10-year yields are
in the 1.8% range and they're hinged on trade talks."
    Acting White House Chief of Staff Mick Mulvaney also added
to positive trade expectations on Tuesday, saying the prospects
for the first part of a U.S. trade deal with China look good.

    In morning trading, U.S. 10-year note yields
rose to 1.839%, from 1.831% late on Monday.
    Yields on 30-year bonds were up at 2.268%, from
2.265% on Monday.
    On the short-end of the curve, U.S. two-year yields advanced
as well to 1.645%, from Monday's 1.627%.
    The decline in U.S. Treasury prices also helped traders
prepare for the auction of $24 billion in 10-year notes later on
Tuesday. Ahead of an auction, traders typically sell Treasuries
to push the yield higher so they can buy them at a lower price.
    Also on Tuesday, the Federal Reserve started its two-day
meeting, but market participants do not expect fireworks from
the statement. The U.S. central bank is widely expected to hold
interest rates steady after cutting them three times this year.
    
      December 10 Tuesday 10:27 AM New York / 1527 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5325       1.5642    0.008
 Six-month bills               1.53         1.5676    0.006
 Two-year note                 99-186/256   1.6415    0.015
 Three-year note               99-236/256   1.6518    0.013
 Five-year note                99-36/256    1.6809    0.013
 Seven-year note               98-252/256   1.7806    0.013
 10-year note                  99-48/256    1.8399    0.009
 30-year bond                  102-92/256   2.266     0.001
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         0.75        -0.25    
 spread                                               
 U.S. 3-year dollar swap        -2.25         0.50    
 spread                                               
 U.S. 5-year dollar swap        -3.25        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -7.25        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -32.75         0.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)
  
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