January 14, 2019 / 3:40 PM / 5 months ago

TREASURIES-U.S. yields edge lower as risk appetite falls after weak China data

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 14 (Reuters) - U.S. Treasury yields on most
maturities slipped on Monday, in line with weakness in European
bond markets, as global stocks fell due to weak Chinese trade
data and soft euro zone numbers.
    Yields on U.S. 10-year and 2-year notes fell to one-week
lows. U.S. 30-year yields, however, were up slightly on the day.
    "Treasuries opened with a little bid with the weak Chinese
trade data, which prompted risk-off appetite," said Justin
Lederer, fixed income director at Cantor Fitzgerald in New York.
    "But there are other themes as well. Overall, we kind of
found a range here. It doesn't seem like the markets want to
stray too far from these levels until we get a feeling in which
direction Treasuries go," he added.
    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, which pushed euro zone yields lower, 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, fell two basis points to 0.214 percent
lower on Friday's close, following the data.
    In the United States, Treasuries tracked the European bond
market. 
    In midmorning trading, U.S. 10-year note yields fell to
2.693 percent from 2.699 percent late on Friday.
    U.S. 30-year bond yields, however, were up slightly at 3.04
percent from 3.036 percent on Friday.
    On the short end of the curve, U.S. 2-year yields traded
lower at 2.528 percent, compared with Friday's 2.545 percent
. 
    Analysts also expressed concern about the prolonged U.S.
government shutdown, which has also boosted Treasury prices
overall. This has been the longest shutdown in U.S. history.
    "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."
    
      January 14 Monday 10:19AM New York / 1519 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               99-248/256   2.5109    -0.005
 Five-year note                100-122/256  2.522     -0.003
 Seven-year note               100-60/256   2.5879    -0.006
 10-year note                  103-172/256  2.697     -0.002
 30-year bond                  106-108/256  3.0457    0.010
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        15.75         0.75    
 spread                                               
 U.S. 3-year dollar swap        12.25         1.25    
 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-Dreyfuss
Editing by Susan Thomas)
  
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