November 22, 2019 / 3:50 PM / 15 days ago

TREASURIES-U.S. yields inch higher on upbeat data; trade news still main driver

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 22 (Reuters) - Most U.S. Treasury yields edged
higher on Friday, boosted by upbeat U.S. data showing a pick-up
in manufacturing and services activity.
    Prior to the release of the data, U.S. yields had been
tracking the decline in Europe amid weak numbers in the region.
. Yields had also been pressured by persistent
uncertainty on the U.S. trade negotiations with China. 
    Friday's data showed U.S. manufacturing output accelerated
in November to its fastest pace in seven months. Services
activity also picked up more than expected, according to an IHS
Markit survey, a sign of the continued resilience of the U.S.
economy in the face of the trade war and other headwinds.
    "There's not a lot of conviction to these moves. The market
is still trading off China headlines," said Justin Lederer,
Treasury trader at Cantor Fitzgerald in New York.
    "We're back 25 basis points on the 10s from two weeks ago.
If the market sees a done deal in trade and there are no
problems in the world, the 10-year yield would be closer to 2%,"
he said. "There's a lot of uncertainty on the deal itself," he
added. "The Hong Kong uncertainty adds another whole level to
it."
    In morning trading, U.S. 10-year note yields
were little changed at 1.774%, from Thursday's 1.772%.
    Yields on 30-year bonds, on the other hand, were
slightly lower at 2.225%, from Thursday's 2.231%.
    On the short end of the curve, U.S. two-year yields rose to
1.613%, from 1.605% on Thursday.
    After steepening on Thursday, the yield curve flattened
again on Friday amid a standstill in U.S.-China trade talks. The
spread between the two-year and 10-year note yields narrowed to
15.3 basis points.
    On Friday, President Donald Trump said a trade deal with
China is "potentially very close" and that he stands with both
the people of Hong Kong and Chinese President Xi Jinping amid
massive protests in Hong Kong.

    
      November 22 Friday 10:25 AM New York/1525 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.54         1.5715    -0.006
 Six-month bills               1.545        1.5828    0.003
 Two-year note                 99-200/256   1.6153    0.010
 Three-year note               100-18/256   1.6006    0.008
 Five-year note                99-108/256   1.6224    0.006
 Seven-year note               99-112/256   1.7113    0.006
 10-year note                  99-200/256   1.774     0.002
 30-year bond                  103-68/256   2.2251    -0.006
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -2.50        -0.25    
 spread                                               
 U.S. 3-year dollar swap        -5.00         0.00    
 spread                                               
 U.S. 5-year dollar swap        -7.50         0.00    
 spread                                               
 U.S. 10-year dollar swap      -11.00         0.50    
 spread                                               
 U.S. 30-year dollar swap      -38.25         0.75    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss)
  
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