November 12, 2019 / 7:27 PM / a month ago

TREASURIES-Yields stay below three-month highs as Trump says trade deal close

 (Recasts with Trump comments, new throughout)
    * Trump says trade deal with China is close
    * Fed's Powell to speak on Wednesday 
    * CPI, retail sales data due this week 

    By Karen Brettell
    NEW YORK, Nov 12 (Reuters) - U.S. Treasury yields held below
three-month highs on Thursday after President Donald Trump
reiterated that the United States is close to signing a trade
deal with China, and before consumer price inflation data on
    Trump on Tuesday said that the two countries are close to a
deal that would end the trade war that has damaged global
growth, but added that if a deal is not made, the United States
will raise tariffs on Chinese imports.             
    Optimism that the two countries will reach a deal to roll
back tariffs as part of its “phase one” deal has boosted stocks
and reduced demand for safe haven U.S. bonds in the past week.
    Bonds didn’t make any large moves on Trump’s comments,
however, with investors now turning attention to consumer price
inflation data on Wednesday and retail sales on Friday for
further clues about the strength of the U.S. economy.
    Federal Reserve Chairman Jerome Powell is also due to speak
to lawmakers on Wednesday.
    “Those data points might be a little bit more consequential
than anything that I can see came out of the speech,” said
Subadra Rajappa, head of U.S. rates strategy at Societe Generale
in New York.
    Benchmark 10-year notes             gained 3/32 in price to
yield 1.923%. The yields rose to 1.973% on Thursday on optimism
a trade deal would be reached, which was the highest since
August 1.
    Optimism about the U.S. economy has increased since jobs
data for October and a service sector report last Tuesday beat
    If the data deteriorates, however, the Fed is seen as likely
to resume cutting interest rates.
    “Fed speakers in general have been unanimous in
characterizing the economy as being in a good place, so I think
it’s going to be about incoming data that guides the Fed on
policy action,” Rajappa said.
    The U.S. central bank cut rates last month for the third
time this year and indicated that additional rate decreases may
be unlikely in the near term.

 (Editing by Chizu Nomiyama)
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