June 24, 2019 / 1:31 PM / 25 days ago

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

    * US-China to meet on trade at G20 summit
    * Iran concerns boosts demand for Treasuries
    * Treasury to sell $113 billion 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 has been blamed on slowing
international growth, which has promoted global central banks 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 10/32 in
price to yield 2.033 percent, down from 2.066 percent on Friday.
    The yields fell to their lowest since November 2016 on
Thursday, a day after the Federal Reserve signaled interest rate
cuts as early as July to battle growing global and domestic
economic risks.             
    Interest rate futures traders are pricing in a 64 percent
chance of a 25 basis point cut in July, and a 36 percent chance
of a 50 basis point cut, according to the CME Group’s FedWatch
tool.
    Trump again criticized the U.S. central bank on Monday for
not cutting interest rates, keeping up his pressure on the
central bank to change its policies.             
    Rising tensions between the United States and Iran have also
boosted safe haven buying of U.S. debt.
    Trump said on Saturday he would impose fresh sanctions on
Iran but he wanted to make a deal to bolster its flagging
economy, an apparent move to defuse tensions following the
shooting down of an unmanned U.S. drone this week by the Islamic
Republic.             
    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.
            

 (Editing by David Gregorio)
  
 
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