Bonds News

TREASURIES-Yields lower on weak Chinese data, Afghan and COVID concerns

 (Adds data, quote, updates prices)
    By Karen Brettell
    NEW YORK, Aug 16 (Reuters) - U.S. Treasury yields fell on
Monday as weak Chinese economic data and concerns about the
Taliban victory in Afghanistan and new COVID variants increased
demand for the safe-haven bonds.
    China's factory output and retail sales growth slowed
sharply and missed expectations in July, while concerns about
global risks grew after Taliban insurgents seized the Afghan
capital Kabul and declared the war against foreign and local
forces over.
    The developments in Afghanistan mean “chaos for 38 million
situated between Pakistan and Iran (and) further destabilizes a
world still giving ground to the pandemic,” Jim Vogel, an
interest rate strategist at FHN Financial, said in a report.
    The continued spread of new COVID-19 variants is also adding
doubts that the economy will return to normal anytime soon.
    “The primary driver of the outright level of US rates is the
path out of the pandemic. At a minimum, the rise of delta
variant cases in the US has introduced enough uncertainty as to
further delay the resumption of business in the paradigm of the
new normal,” analysts at BMO Capital Markets said in a note.
    The New York Federal Reserve said on Monday its barometer of
manufacturing business activity in New York state declined more
than expected in August as shipments growth nearly stalled and
new orders grew at a much softer pace than a month earlier.

    Benchmark 10-year yields fell four basis points
to 1.256%, after earlier getting as low as 1.223%. The yield
curve between two-year and 10-year notes
flattened two basis points to 105 basis points.
    Investors are also focused on minutes from the Federal
Reserve’s July meeting due on Wednesday, which will be scoured
for any new insight into when the U.S. central bank is likely to
begin paring bond purchases.
    Fed Chair Jerome Powell told reporters after the meeting
that he wants to see “strong job numbers” in the coming months
before tapering purchases.
    The Fed is seen as most likely to announce the change at its
December meeting, though some analysts and investors have warned
that it may happen sooner.
    Powell may also drop hints on when a taper is likely when he
speaks at the Fed’s annual economic symposium at Jackson Hole,
Wyoming, next week, though he is not expected to announce a
policy change then.
    “It’s not an official policy meeting, it’s not something
that has been really used to make announcements about policy
changes in the past,” said Tom Simons, a money market economist
at Jefferies in New York.
    The Treasury will sell $27 billion in 20-year bonds on
Wednesday and $8 billion in 30-year Treasury Inflation-Protected
Securities (TIPS) on Thursday.
      August 16 Monday 3:55PM New York / 1955 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.065        0.0659    0.013
 Six-month bills               0.0475       0.0482    -0.003
 Two-year note                 99-215/256   0.2072    -0.008
 Three-year note               99-224/256   0.417     -0.021
 Five-year note                99-98/256    0.7522    -0.036
 Seven-year note               99-196/256   1.035     -0.042
 10-year note                  99-240/256   1.2567    -0.040
 20-year bond                  107-32/256   1.8188    -0.025
 30-year bond                  101-188/256  1.9236    -0.024
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         8.75         0.00    
 U.S. 3-year dollar swap         9.50        -0.25    
 U.S. 5-year dollar swap         8.00        -0.25    
 U.S. 10-year dollar swap        0.25         0.00    
 U.S. 30-year dollar swap      -30.75        -0.75    
 spread (Editing by Mark Heinrich)