October 15, 2019 / 1:42 PM / a month ago

TREASURIES-Yields fall as trade deal optimism ebbs

    * Yields lower as optimism on U.S. China trade deal fades
    * Fed seen likely to cut rates later this month 
    * Brexit negotiations in focus

    By Karen Brettell
    NEW YORK, Oct 15 (Reuters) - U.S. Treasury yields edged
lower on Tuesday as investors pared back expectations that the
United States and China are close to reaching an agreement to
end their trade war.
    Reports of a "Phase 1" trade deal between the United States
and China last week encouraged risk taking and reduced demand
for safe-haven debt, however the dearth of details around the
agreement has since curbed this enthusiasm.
    U.S. Treasury Secretary Steven Mnuchin said on Monday that
an additional round of tariffs on Chinese imports will likely be
imposed if a trade deal with China is not reached, but added
that he expected the agreement to go through.
    “Any good news was going to bring a big reaction and the
idea that the U.S. sort of oversold the accomplishment wasn’t a
complete surprise either, and was perhaps factored in to some of
the reaction last week,” said Jim Vogel, an interest rate
strategist at FTN Financial in Memphis, Tennessee.
    Benchmark 10-year yields rose to a three-week
high of 1.767% on Friday, before dropping to 1.720% on Tuesday.
The bond market was closed on Monday for the Columbus Day
holiday.
    Retail sales data on Wednesday is the next major economic
focus and will be evaluated for the strength of U.S. consumer
confidence.
    The Federal Reserve is expected to cut rates when it meets
on October 29-30 though Fed policymakers are divided on whether
further cuts are needed for the economy.
    Investors are also focused on Europe where officials from
Britain and the EU will meet at a summit on Thursday and Friday
that will determine whether Britain is headed for a deal to
leave the bloc on Oct. 31, a disorderly no-deal exit or a delay.

    
    
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.64         1.6738    -0.008
 Six-month bills               1.6275       1.6679    -0.013
 Two-year note                 99-215/256   1.5834    -0.031
 Three-year note               99-120/256   1.5571    -0.029
 Five-year note                99-202/256   1.5443    -0.033
 Seven-year note               99-248/256   1.6297    -0.038
 10-year note                  99-36/256    1.7203    -0.033
 30-year bond                  101-12/256   2.2019    -0.012
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         4.50         0.00    
 spread                                               
 U.S. 3-year dollar swap         1.25         0.00    
 spread                                               
 U.S. 5-year dollar swap        -0.75        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -8.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -38.50        -0.50    
 spread                                               
 


 (Editing by Nick Zieminski)
  
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