January 9, 2019 / 7:40 PM / in 12 days

TREASURIES-Yields fall on dovish Fed speakers, strong auction

 (Recasts with Fed speakers, adds Fed minutes, auction results,
updates prices)
    * Fed speakers, meeting minutes seen as dovish
    * Treasury sells $24 billion 10-year notes to strong demand
    * Investors optimistic on trade deal between U.S. and China 

    By Karen Brettell
    NEW YORK, Jan 9 (Reuters) - Dovish Federal Reserve speakers
and a strong 10-year note auction helped bring Treasury yields
down from two-week highs on Wednesday, after optimism that the
United States would reach a trade deal with China had earlier
boosted risk appetite.
    Another clutch of Fed policymakers said on Wednesday they
would be cautious about raising interest rates without getting a
better handle on how growing risks to an otherwise solid U.S.
economic outlook could play out.             
    It comes after Fed Chairman Jerome Powell said on Friday he
was aware of the risks of an economic slowdown and would be
patient and flexible in policy decisions this year.             
    Minutes from the Fed’s December meeting released on
Wednesday also showed that a range of policymakers said they
could be patient about future interest rate increases and a few
did not support the central bank's rate increase that month.
            
    “The FOMC minutes are on the dovish side as most of the Fed
board felt they could be patient about further rate hikes,” said
Tom di Galoma, a managing director at Seaport Global Holdings in
New York. “This certainly throws a March tightening out the
window.”
    Benchmark 10-year notes             gained 1/32 in price on
the day to yield 2.714 percent, after earlier rising to 2.747
percent, the highest since Dec. 28.
    Market volatility has boosted expectations that the U.S.
central bank will not raise rates this year even though the Fed
has signaled two hikes are likely.
    Investors will look for new clues on interest rate policy
when Powell speaks on Thursday.
    Strong demand for a $24 billion in 10-year notes on
Wednesday also sent yields lower, a day after the Treasury
Department held a weak $38 billion auction of three year notes.
    Direct bidders, which includes some central banks and large
fund managers, bought the largest share of the sale since May
2015.                          
    The government will also sell $16 billion in 30-year bonds
on Thursday.
    Benchmark yields hit their highest levels this year earlier
on Wednesday on optimism of a trade deal between the U.S. and
China, which boosted stocks and reduced demand for safe haven
U.S. debt.
    Chinese and U.S. teams ended trade talks in Beijing on
Wednesday that lasted longer than expected and officials said
details will be released soon, raising hopes of avoiding an
all-out trade war that could badly disrupt the global economy.
            
    

 (Editing by Susan Thomas)
  
 
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