January 3, 2020 / 2:09 PM / 22 days ago

TREASURIES-Yields drop after U.S. kills top Iranian commander

 (Adds quotes, data outlook, updates prices)
    By Karen Brettell
    NEW YORK, Jan 3 (Reuters) - U.S. Treasury yields fell
sharply on Friday on safety buying after a U.S. air strike
killed Iran Quds Force chief Qassem Soleimani, increasing
tensions between the two countries.
    The Pentagon said on Thursday that Soleimani was actively
developing plans to attack Americans in Iraq and the Middle
East.
    "The (price) rally is a perfectly expected response to the
increase in geopolitical tensions," said Jon Hill, an interest
rate strategist at BMO Capital Markets in New York. 
     Still, yields came off their overnight lows as some
investors bet that further escalation between the two countries
may not necessarily be forthcoming. 
    "The partial retracement indicates a willingness to look
through these kind of spikes in tensions," Hill said. "For the
past several years fading these sharp spikes in escalation has
been the winning trade, the question is is this time different?"
    Benchmark 10-year note yields were last 1.821%,
after falling as low as 1.795% overnight, which was the lowest
since Dec. 12. They closed at 1.882% on Thursday.
    Friday's manufacturing data will also be watched for any
indications of improvement after the United States and China
last month agreed to the first phase of a trade deal.
    Bond yields rose in December as risk appetite improved on
optimism the United States and China would de-escalate their
trade war, which has been blamed for slowing global growth.

      January 3 Friday 8:53AM New York / 1353 GMT
    
    
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             1.5          1.5305    -0.002
 Six-month bills               1.5175       1.5545    -0.023
 Two-year note                 100-44/256   1.5366    -0.038
 Three-year note               100-52/256   1.5539    -0.046
 Five-year note                100-166/256  1.614     -0.056
 Seven-year note               100-20/256   1.7381    -0.060
 10-year note                  99-92/256    1.8212    -0.061
 30-year bond                  102-8/256    2.2808    -0.059
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.25        -0.75    
 spread                                               
 U.S. 3-year dollar swap         5.00        -0.75    
 spread                                               
 U.S. 5-year dollar swap         1.75        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -4.00        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -31.75        -1.00    
 spread                                               
 

    

 (Reporting by Karen Brettell; Editing by Chizu Nomiyama and
Andrea Ricci)
  
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