November 13, 2019 / 7:19 PM / a month ago

TREASURIES-Yields fall as trade optimism fades

 (Adds report on trade talks, updates prices)
    * Optimism over a U.S.-China trade deal fades
    * Recent sell-off seen as overdone
    * Fed's Powell talks up U.S. economy

    By Karen Brettell
    NEW YORK, Nov 13 (Reuters) - U.S. Treasury yields fell on
Wednesday as optimism that the United States and China will
reach a deal to remove tariffs faded, and as the recent rise in
yields was seen as overdone.
    U.S. President Donald Trump said on Tuesday that the two
countries are close to a deal that would end the trade war but
added that if a deal is not made the United States will raise
tariffs on Chinese imports.             
    “It seems overnight there were a lot more fears that the
U.S. and China were further apart on the trade deal than
initially suggested,” said Gennadiy Goldberg, an interest rate
strategist at TD Securities in New York.
    The Wall Street Journal also reported on Wednesday that the
trade talks have hit a snag over farm purchases.             
    At the same time, the extent of the sell-off in the past two
weeks, which has been based on optimism about a trade deal and
better than expected U.S. data, is seen as exaggerated for the
time being.
    Benchmark 10-year note yields             rose to 1.973% on
Thursday, which was the highest since August 1, and have climbed
from 1.670% on November 1. 
    On Wednesday, the yields fell to 1.872%, from 1.909% late
Tuesday.
    Yields also dipped slightly on Wednesday after data showed
that U.S. consumer prices gained in October, though core CPI
gains were based on an uptick in healthcare costs. Shelter
categories weakened, with the rent index rising 0.1%, the
smallest gain since April 2011.
    “Food and energy are keeping inflation up, but underlying
inflation isn’t doing so great,” Goldberg said.             
    Retail sales data on Friday is the next major economic
focus.
    Federal Reserve Chairman Jerome Powell said on Wednesday
that U.S. central bankers see a "sustained expansion" ahead for
the country's economy, with the full impact of recent interest
rate cuts still to be felt and low unemployment boosting
household spending.             
        

 (Editing by Nick Zieminski)
  
 
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