June 24, 2019 / 6:36 PM / 22 days ago

TREASURIES-Yields fall as U.S.-China trade talks in focus

 (Adds sanctions on Iran; updates prices)
    * Iran concerns boosts demand for Treasuries
    * Trump again lashes out at Federal Reserve
    * Treasury to sell $113 billion in notes this week

    By Karen Brettell
    NEW YORK, June 24 (Reuters) - U.S. Treasury yields fell on
Monday, holding just above almost three-year lows, ahead of
trade talks between the U.S. and China later this week.
    Investors are focused on whether U.S. President Donald Trump
and Chinese President Xi Jinping can de-escalate the trade war
between the two countries when they meet at the G20 summit in
Japan.              Tariffs between the two counties have been
blamed for slowing international growth, prompting global
central banks to signal a readiness to adopt looser policies.
    “That’s one of the biggest uncertainties in the market right
now, and has an effect on data and growth,” said Justin Lederer,
an interest rate strategist at Cantor Fitzgerald in New York.
    Benchmark 10-year notes             were last up 11/32 in
price to yield 2.028 percent, down from 2.066 percent on Friday.
    Yields fell to their lowest level since November 2016 on
Thursday, a day after the Federal Reserve signaled it could cut
interest rates as early as July to battle growing global and
domestic economic risks.             
    Interest rate futures traders are pricing in a 57 percent
chance of a 25-basis-point cut in July, and a 43 percent chance
of a 50-basis-point cut, according to the CME Group’s FedWatch
    Trump again excoriated the U.S. central bank for not cutting
interest rates on Monday, saying that it "doesn't know what it
is doing" as he blamed the Fed's rate hikes for holding back
growth in the stock market and the economy.             
    Rising tensions between the United States and Iran have also
boosted safe-haven buying of U.S. debt. Trump imposed new U.S.
sanctions on Iran on Monday following Tehran's downing of an
unmanned American drone and said the measures would target
Iranian Supreme Leader Ayatollah Ali Khamenei.             
    Demand for bonds from investors' rebalancing accounts for
quarter-end is also expected this week.
    The Treasury Department will sell $113 billion in
coupon-bearing supply this week, including $40 billion in
two-year notes on Tuesday, $41 billion in five-year notes on
Wednesday and $32 billion in seven-year notes on Thursday.

 (Reporting by Karen Brettell
Editing by Leslie Adler)
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