April 9, 2019 / 2:19 PM / 9 days ago

TREASURIES-U.S. yields fall on global growth, Brexit worries

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 9 (Reuters) - U.S. Treasury yields slid on
Tuesday, weighed down by concerns about the global economic
outlook after the International Monetary Fund reduced growth
forecasts for 2019, as well as a round of headlines on Britain's
exit from the European Union.
    "The Federal Reserve has actually mentioned global growth as
a potential headwind," said Wen Lu, rates and volatility
strategist at TD Securities in New York. "So the IMF has pointed
out something that has been fairly obvious for the market for
some time and it's a potential headwind that is on people's
radar."
    The IMF said on Tuesday it has cut its global growth outlook
for 2019 and warned that growth could slow further due to trade
tensions and a potentially disorderly Brexit.
    Brexit has also been a lingering concern for financial
markets as investors worry about the fallout should it fail.
    Earlier in the global session, the BBC reported that a
British euroskeptic lawmaker had been advised that German
Chancellor Angela Merkel was willing to put a five-year time
limit on the Northern Ireland backstop in Britain's EU
withdrawal agreement. But that was denied by a German government
spokesman.
    Disagreement between London and the European Union over the
"Irish backstop" is blocking a Brexit deal from getting through
Britain's parliament.
    Gains in Treasury prices also came after losses on Monday 
in the midst of Saudi Aramco's mammoth bond offering. Dealers
historically lock in borrowing costs for corporate bonds they
are underwriting by selling Treasuries as a hedge before the
deal is completed. Once the bond is sold, the dealer buys back
Treasuries to exit the rate lock.
    Saudi Aramco's first-ever bond deal was oversubscribed,
attracting more than $100 billion in demand. Aramco expects to
raise more than $10 billion from the deal, which is split into
six tranches with maturities ranging from three to 30 years. The
bonds will be priced later on Tuesday.
    "I think all the duration went through yesterday in
anticipation of that," TD's Lu said. "So today you're seeing a
minor retracement of that largely because a lot of the guys are
fairly positioned."
    In mid-morning trading, U.S. 10-year note yields fell to
2.495%, down from 2.519% late on Monday.
    U.S. 30-year bond yields were also down at 2.902%
, from 2.924% on Monday.
    On the short end of the curve, U.S. 2-year yields slipped to
2.339%, compared with Monday's 2.358%. 
    Later on Tuesday, the Treasury auctions $38 billion in U.S.
three-year notes, kicking off $78 billion in coupon offerings
this week.
    
    April 9 Tuesday 10:01AM New York / 1401 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.375        2.4227    -0.006
 Six-month bills               2.395        2.4581    -0.007
 Two-year note                 99-212/256   2.3395    -0.019
 Three-year note               100-60/256   2.2915    -0.022
 Five-year note                99-42/256    2.3038    -0.022
 Seven-year note               99-20/256    2.3943    -0.025
 10-year note                  101-32/256   2.4953    -0.024
 30-year bond                  101-252/256  2.9001    -0.024
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.75         0.00    
 spread                                               
 U.S. 3-year dollar swap         7.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         4.00         0.25    
 spread                                               
 U.S. 10-year dollar swap       -1.50         0.25    
 spread                                               
 U.S. 30-year dollar swap      -24.25         0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)
  
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