July 3, 2019 / 2:38 PM / in 15 days

TREASURIES-U.S. yields fall as euro zone yields hit record lows

    * U.S. private sector adds fewer workers than expected in
June-ADP
    * U.S. services growth cools to slowest pace in two years -
ISM
    * Euro zone yields tumble as Lagarde nominated as next ECB
chief
    * U.S. bond market to close at 2 p.m. EDT, to stay shut
Thursday

 (Updates market action after ISM services data)
    By Richard Leong
    NEW YORK, July 3 (Reuters) - U.S. Treasury yields fell on
Wednesday with 10-year yields hitting their lowest in over 2-1/2
years as euro zone yields tumbled on record lows on bets the
European Central Bank's next chief would stay a dovish course to
help the euro zone economy.
    Expectations of more ECB stimulus under Christine Lagarde,
who had headed the International Monetary Fund, when she takes
over from Mario Draghi in November raised the prospect that
global bond yields have room to fall, analysts said.

    "Treasuries rallied in sympathy with European bonds on news
IMF head Christine Lagarde will be nominated to become the next
ECB President as she is expected to pursue dovish monetary
policy," said Karl Haeling, head of capital markets sales at
LBBW.
    Reinforcing traders' perception of easy monetary policy was
U.S. President Donald Trump's nominations of Christopher Waller
and Judy Shelton to the Federal Reserve Board. Both are seen as
dovish in their policy stance.
    At 10:29 a.m. (1429 GMT), benchmark 10-year Treasury yields
 were down 2.50 basis points at 1.952%. They touched
1.939% earlier as 10-year German bund yields reached
a record low at -0.399%.
    The Fed, the ECB and other major central banks are
considering whether to embark on lowering interest rates and/or
buying more assets to combat sluggish inflation, and slowing
growth exacerbated by global trade tensions.
    Even in the United States where its economic expansion hit a
record run this month, there are signs of cooling.
    Payroll processor ADP said on Wednesday U.S. companies added
102,000 jobs in June, falling short of the 140,000 forecast by
economists polled by Reuters. The prior month's figure was
revised up to 41,000 from an originally reported 27,000
increase.
    Meanwhile, the U.S. trade gap widened to a five-month high
in May, which was likely a drag on economic growth in the second
quarter.
    The growth of the vast services sector fell to its slowest
pace since July 2017, the Institute for Supply Management said.
 
    Amid these omens of a decelerating economy, traders fully
expect Fed officials will agree to lower U.S. interest rates by
at least a quarter point at the end of July to preserve the
longest economic expansion on record, based on CME Group's
calculation of interest rates futures prices.    
    The U.S. bond market will close early, at 2 p.m. EDT (1800
GMT), on Wednesday, ahead of the U.S. July Fourth holiday on
Thursday.
July 3 Wednesday 10:29AM EDT/ 1429 GMT
                               Price                   
 US T BONDS SEP9               156-20/32    0-17/32    
 10YR TNotes SEP9              128-72/256   0-36/256   
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             2.16         2.2079     0.003
 Six-month bills               2.0325       2.082      -0.003
 Two-year note                 99-186/256   1.7656     0.001
 Three-year note               100-32/256   1.7062     -0.006
 Five-year note                100-22/256   1.7319     -0.016
 Seven-year note               100-72/256   1.8319     -0.019
 10-year note                  103-196/256  1.9532     -0.024
 30-year bond                  108-68/256   2.4814     -0.027
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap         2.75        -1.25     
 spread                                                
 U.S. 3-year dollar swap         1.50        -1.00     
 spread                                                
 U.S. 5-year dollar swap        -1.75        -0.75     
 spread                                                
 U.S. 10-year dollar swap       -5.00        -0.50     
 spread                                                
 U.S. 30-year dollar swap      -32.50        -0.25     
 spread                                                
 


    
 (Reporting by Richard Leong; editing by Jonathan Oatis)
  
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