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Karen Brettell

TREASURIES-Benchmark yields near one-year lows as Fed policy in focus

9:32am EDT

* Dovish tilt by Fed main market driver * Three-month, 10-year yield curve modestly inverted * Treasury to sell $113 bln notes this week By Karen Brettell NEW YORK, March 25 Benchmark 10-year Treasury yields held near more than one-year lows on Monday while the yield curve between three-month bills and 10-year notes was modestly inverted as investors evaluated last week’s dovish pivot by the Federal Reserve. The U.S. central bank on Wednesday stunned investors by abandoning projections for any interest rate hikes this year and saying it would halt the steady decline of its balance sheet in September. The yield curve inverted on Friday after disappointing manufacturing data in the United States and Germany further raised concerns about the slowing global economy. An unexpected improvement in German business morale in March on Monday, however, briefly helped to lift yields off their lows. After rallying by around 20 basis points last week a new catalyst may be needed to send 10-year yields much below current levels. “I think it’s hard for 10-year notes to continue to rally much further through this without some more confirming signals that the economy is actually in bad shape,” said Tom Simons, a money market economist at Jefferies in New York. The yields were last 2.444 percent after falling to 2.418 percent on Friday, the lowest since January 2018. The yield curve between three-month notes and 10-year yields was inverted by around one basis point, slightly less than levels reached on Friday. The inversion, if it persists, is seen as a reliable indicator that a recession is likely in one-to-two years. Typically, however, the curve will chop around for some time before confirming an economic downturn. Unprecedented central bank stimulus may have also altered the curve dynamics, making an inversion a less clear signal of economic weakness than in the past. “We’re examining yield curve relationships in an environment where the Fed still has enormous control over the long end of the curve, given how much they own on their balance sheet, and we’re dealing with a very accommodative global policy regime as well,” said Simons. Chicago Federal Reserve Bank President Charles Evans said on Monday it was understandable for markets to be nervous when the yield curve flattened, though he was still confident about the U.S. economic growth outlook. 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 Susan Thomas)

TREASURIES-Yields range-bound amid mixed economic data

Feb 15 2019

(Adds data, updates prices) * Yields in middle of recent range as economic data mixed * Optimism that U.S., China will reach trade deal By Karen Brettell NEW YORK, Feb 15 U.S. Treasury yields rose slightly on Friday but held in the middle of their recent range as investors digested mixed economic data for signals of Federal Reserve interest rate policy. Data on Friday showed that U.S. manufacturing fell sharply in January, while U.S. import prices fell for a third straight month, indicating that inflation and the economy were losing momentum. It comes after retail sales for December on Thursday posted the largest decline since September 2009. An increase in core consumer price inflation on Wednesday, however, was seen as easing concerns about falling inflation. Job growth has also been strong with employers hiring the most workers in 11 months in January. “It’s been a mix. It’s not been a trend of weaker or stronger that can really push the market one way or another, that’s why I think we’re kind of sitting here and waiting,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. Benchmark 10-year notes fell 2/32 in price to yield 2.666 percent, up from 2.659 percent on Thursday. The yields have held between 2.543 percent and 2.799 percent this year, after falling from a seven-year high of 3.261 percent in October. Optimism that the United States and China would reach a trade deal also helped boost stocks on Friday, and reduced demand for safe haven bonds. Talks between the two countries to resolve their bruising trade war will resume next week in Washington, with both sides saying this week's negotiations in Beijing made progress. Investors are also focused on minutes from the Fed’s January meeting, which will be released next Wednesday. At that meeting, the U.S. central bank signaled its three-year-drive to tighten monetary policy may be at an end amid a suddenly cloudy outlook for the U.S. economy due to global headwinds and impasses over trade and government budget negotiations. President Donald Trump on Friday declared a national emergency in a bid to fund his promised wall at the U.S.-Mexico border without congressional approval, an action Democrats vowed to challenge as a violation of the U.S. Constitution. He was also expected later on Friday to sign a bipartisan government spending bill Congress approved on Thursday that would prevent another partial government shutdown by funding several agencies that otherwise would have closed on Saturday. (Editing by Nick Zieminski ) )

TREASURIES-Yields rise on trade deal optimism after mixed economic data

Feb 15 2019

* Yields in middle of recent range as economic data mixed * Optimism that U.S., China will reach trade deal By Karen Brettell NEW YORK, Feb 15 U.S. Treasury yields rose on Friday but held in the middle of their recent range as investors digested mixed economic data this week for signals of Federal Reserve interest rate policy. Data on Friday showed that U.S. import prices fell for a third straight month in January, leading to the largest annual drop in nearly 2-1/2 years, the latest indication of tame inflation. U.S. manufacturing output posted its steepest fall in eight months in January. Yields rose to one-week highs on Wednesday after core consumer price inflation gained modestly in January, easing concerns about a drop in inflation. But they fell back again on Thursday after retail sales fell 1.2 percent in December, the largest decline since September 2009. “It’s been a mix. It’s not been a trend of weaker or stronger that can really push the market one way or another, that’s why I think we’re kind of sitting here and waiting,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. Benchmark 10-year notes fell 5/32 in price to yield 2.661 percent, up from 2.659 percent on Thursday. The yields have held between 2.543 percent and 2.799 percent this year, after falling from a seven-year high of 3.261 percent in October. Optimism that the United States and China would reach a trade deal also helped boost stocks on Friday, and reduced demand for safe haven bonds. Talks between the two countries to resolve their bruising trade war will resume next week in Washington, with both sides saying this week's negotiations in Beijing made progress. Investors are next focused on minutes from the Fed’s January meeting, which will be released next Wednesday. At that meeting, the U.S. central bank signaled its three-year-drive to tighten monetary policy may be at an end amid a suddenly cloudy outlook for the U.S. economy due to global headwinds and impasses over trade and government budget negotiations. U.S. President Donald Trump was poised on Friday to declare a national emergency at the U.S.-Mexico border, a move that Democrats vowed to challenge as an unconstitutional attempt to fund his proposed border wall without approval from Congress. Trump was also expected to sign a bipartisan government spending bill approved by Congress on Thursday that would prevent another federal shutdown by funding several agencies that otherwise would have closed on Saturday morning. (Editing by Nick Zieminski ) )

TREASURIES-Yields fall as weak U.S. retail sales spur economy concerns

Feb 14 2019

(Adds comments from Fed's Brainard; updates prices) * Retail spending fell in December * Germany narrowly avoids recession * U.S., China trade talks in focus By Karen Brettell NEW YORK, Feb 14 Treasury yields fell on Thursday after data showed that U.S. retail sales recorded their biggest drop in more than nine years in December, suggesting a slowdown in economic activity at the end of 2018. The Commerce Department said retail sales tumbled 1.2 percent, the largest decline since September 2009, when the economy was emerging from recession. “It calls into question the underlying strength of the domestic consumer and in particular this kind of lays the groundwork to confirm the Fed’s bias in pausing the tightening cycle,” said Jon Hill, an interest rate strategist at BMO Capital Markets in New York. Benchmark 10-year yields have fallen from seven-year highs reached in October on concern about weak international growth and the possibility of a slowing U.S. economy. Those fears have also led the Federal Reserve to adopt a far more dovish posture on further interest rate increases. Hill added that the Fed funds market is now pricing for the possibility of a rate cut in late 2019 or early 2020. Fed Governor Lael Brainard also said on Thursday that the U.S. central bank should stop paring its balance sheet by the end of this year, suggesting that it could wind up with a permanently bigger balance sheet than had been expected even a few months ago. The U.S. data comes after Germany’s gross domestic product came in even lower than economists’ expectations in the fourth quarter of last year, with the country narrowly avoiding recession. U.S. 10-year notes gained 13/32 in price to yield 2.661 percent, down from 2.706 percent on Wednesday. They are down from 3.261 percent in October. The yields rose to one-week highs on Wednesday after data showed that core consumer price inflation, which excludes the volatile food and energy components, gained 0.2 percent in January, easing some concerns about a drop in inflation. Consumer sentiment data on Friday will be the next focus for further signals about the U.S. economy's strength. Investors are also focused on trade talks between the United States and China. The Trump administration's top two negotiators in trade talks with China will meet on Friday with Chinese President Xi Jinping, but there has been no decision to extend a March 1 U.S. deadline for a deal, White House economic adviser Larry Kudlow said on Thursday. (Reporting by Karen Brettell; Editing by Dan Grebler) )

TREASURIES-Yields fall after weak retail sales data

Feb 14 2019

* Retail spending fell in December * Germany narrowly avoids recession * U.S., China trade talks in focus By Karen Brettell NEW YORK, Feb 14 U.S. Treasury yields fell on Thursday after data showed that U.S. retail sales recorded their biggest drop in more than nine years in December, suggesting a slowdown in economic activity at the end of 2018. The Commerce Department said on Thursday that retail sales tumbled 1.2 percent, the largest decline since September 2009 when the economy was emerging from recession. “It calls into question the underlying strength of the domestic consumer and in particular this kind of lays the groundwork to confirm the Fed’s bias in pausing the tightening cycle,” said Jon Hill, an interest rate strategist at BMO Capital Markets in New York. Benchmark 10-year yields have fallen from seven-year highs reached in October on concern about weak international growth and the possibility of a slowing U.S. economy. These fears have also led the Federal Reserve to adopt a far more dovish outlook on further interest rate increases. Hill added that the Fed funds market is now pricing for the possibility of a rate cut in late 2019 or early 2020. The U.S. data comes after Germany’s gross domestic product came in even lower than economists’ expectations in the fourth quarter of last year, with the country narrowly avoiding recession. U.S. 10-year notes gained 10/32 in price to yield 2.648 percent, down from 2.706 percent on Wednesday. They are down from 3.261 percent in October. The yields rose to one-week highs on Wednesday after data showed that core consumer price inflation, which excludes the volatile food and energy components, gained 0.2 percent in January, easing some concerns about a drop in inflation. Consumer sentiment data on Friday will be the next focus for further signals about the U.S. economy's strength. Investors are also focused on efforts to avert another partial U.S. government shutdown and on trade talks between the United States and China. The U.S. Congress on Thursday aimed to end a dispute over border security with legislation that would ignore President Donald Trump's request for $5.7 billion to help build a wall on the U.S.-Mexico border but avoid a shutdown. U.S. Treasury Secretary Steven Mnuchin said he was looking forward to trade talks with China on Thursday, as discussions in Beijing moved to a higher level in a push to de-escalate a tariff war ahead of a March 1 deadline for a deal. (Editing by Susan Thomas) )

TREASURIES-Yields rise, curve flattens as U.S. core consumer prices gain

Feb 13 2019

(Updates prices) * Core consumer prices rose in January * Trump keeping options open on government funding deal By Karen Brettell NEW YORK, Feb 13 U.S. benchmark Treasury debt yields rose to one-week highs on Wednesday and the yield curve flattened after data showed that core consumer prices rose in January, easing concerns about a drop in inflation. The core Consumer Price Index, which excludes volatile food and energy components, rose 0.2 percent for a fifth straight month. “The core CPI print was quite solid,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. “I think there is a little bit of a breath of relief here that underlying inflation is still relatively solid and the Fed can continue to hike.” Benchmark 10-year notes fell 7/32 in price to yield 2.708 percent. The yields have dropped from 2.799 percent on Jan. 18 and are down from a seven-year high of 3.261 percent in October as investors adopt a more pessimistic view of the global economy and price in a far more dovish Federal Reserve. The yield curve between two-year and 10-year notes flattened to 17 basis points, from 18 basis points before the inflation data. Two-year notes are the most sensitive to interest rate policy. Retail sales data for December on Thursday and consumer sentiment data on Friday will be the next economic focus for further signals about the U.S. economy's strength. Yields also rose as optimism that the U.S. government would avert another shutdown and that the U.S. would forge a trade deal with China reduced safe haven demand for the bonds. U.S. President Donald Trump left his options open on Wednesday over whether to sign a funding deal that would avert another partial government shutdown but leave him short of the money he wants to build a wall on the border with Mexico. U.S. Treasury Secretary Steven Mnuchin said talks with China went well on Wednesday, as the world's two largest economies try to iron out an agreement to resolve their trade dispute. (Editing by Bernadette Baum and Steve Orlofsky) )

TREASURIES-Yields rise, curve flattens as core inflation gains

Feb 13 2019

* Core consumer prices rose in January * Trump seen supporting deal to avert govt. shutdown By Karen Brettell NEW YORK, Feb 13 U.S. benchmark Treasury yields rose to one-week highs on Wednesday and the yield curve flattened after data showed that core consumer prices rose in January, easing concerns about a drop in inflation. The core Consumer Price Index, which excludes volatile food and energy components, gained 0.2 percent, rising by the same margin for a fifth straight month. “The core CPI print was quite solid,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. “I think there is a little bit of a breath of relief here that underlying inflation is still relatively solid and the Fed can continue to hike.” Benchmark 10-year notes fell 7/32 in price to yield 2.708 percent. The yields have fallen from 2.799 percent on Jan. 18 and are down from a seven-year high of 3.261 percent in October as investors adopt a more pessimistic view of the global economy and price in a far more dovish Federal Reserve. The yield curve between two-year and 10-year notes flattened to 17 basis points, from 18 basis points before the inflation data. Retail sales data for December on Thursday and consumer sentiment data on Friday will be the next economic focus for further signals about the U.S. economy's strength. Yields also rose as optimism that the U.S. government would avert another shutdown and that the U.S. would forge a trade deal with China reduced safe haven demand for the bonds. Congress faced a tight deadline on Wednesday to pass a bipartisan accord to keep the government open as news outlets reported President Donald Trump planned to sign the deal as he eyes other ways to fund his wall without lawmakers. U.S. Treasury Secretary Steven Mnuchin said talks with China went well on Wednesday, as the world's two largest economies try to iron out an agreement to resolve their trade dispute. (Editing by Bernadette Baum) )

TREASURIES-Yield up on hopes of averting govt shutdown, before data

Feb 12 2019

(Adds comment by Fed's Powell, updates prices) * Tentative pact to avert shutdown boosts risk appetite * Consumer price data on Wednesday in focus for rate outlook By Karen Brettell NEW YORK, Feb 12 U.S. Treasury yields rose on Tuesday after lawmakers reached a tentative pact to avert another government shutdown, and as investors focused on inflation data expected on Wednesday for further signals about interest rate policy. The agreement in principle to avoid another shutdown helped boost stock markets and reduce demand for safe-haven bonds, though President Donald Trump said he has yet to decide whether to support the agreement. There was also optimism that the United States would reach a trade deal with China ahead of high-level trade talks as the world's two largest economies attempt to hammer out a deal ahead of a March 1 deadline and avoid another escalation of tariffs. For the most part, however, investors were focused on Federal Reserve policy as they weighed still-solid U.S. economic growth, albeit with low inflation, against a worsening international economic picture. “The market is really trying to figure out which side of that drives the market,” said Brian Daingerfield, a macro strategist at NatWest Markets in Stamford, Connecticut. Benchmark 10-year yields have fallen from 2.799 percent on Jan. 18 and are down from a seven-year high of 3.261 percent in October as investors price in a far more dovish Federal Reserve. The yields bounced off technical support at around 2.62 percent on Friday. On Tuesday, the notes fell 7/32 in price to yield 2.686 percent. Consumer price data due on Wednesday will be the next indication of whether prices are rising, which could spur the U.S. central bank to resume raising rates. “Inflation will be an extremely important reading for the Fed in terms of their ability to stay patient. That’s very much tied to inflation staying low,” said Daingerfield. Retail sales data for December on Thursday and consumer sentiment data on Friday were also in focus for further signals about the U.S. economy's strength. Fed Chairman Jerome Powell said on Tuesday that he does not see the risk of a U.S. recession as elevated. (Editing by Nick Zieminski ) )

TREASURIES-Yield up on hopes of averting govt shutdown, before data

Feb 12 2019

* Tentative pact to avert shutdown boosts risk appetite * Consumer price data on Wednesday in focus for rate outlook By Karen Brettell NEW YORK, Feb 12 U.S. Treasury yields rose on Tuesday after lawmakers reached a tentative pact to avert another government shutdown, and as investors focused on inflation data expected on Wednesday for further signals about interest rate policy. The agreement in principle to avoid another shutdown helped boost stock markets and reduce demand for safe-haven bonds, though it was unclear whether Republican President Donald Trump would back an agreement that contained funds for border security but not a wall. There was also optimism that the United States would reach a trade deal with China ahead of high-level trade talks as the world's two largest economies attempt to hammer out a deal ahead of a March 1 deadline and avoid another escalation of tariffs. For the most part, however, investors were focused on Federal Reserve policy as they weighed still-solid U.S. economic growth, albeit with low inflation, against a worsening international economic picture. “The market is really trying to figure out which side of that drives the market,” said Brian Daingerfield, a macro strategist at NatWest Markets in Stamford, Connecticut. Benchmark 10-year yields have fallen from 2.799 percent on Jan. 18 and are down from a seven-year high of 3.261 percent in October as investors price in a far more dovish Fed. The yields bounced off technical support at around 2.62 percent on Friday. On Tuesday, the notes fell 5/32 in price to yield 2.677 percent. Consumer price data due on Wednesday will be the next indication of whether prices are rising, which could spur the U.S. central bank to resume raising rates. “Inflation will be an extremely important reading for the Fed in terms of their ability to stay patient. That’s very much tied to inflation staying low,” said Daingerfield. Retail sales data for December on Thursday and consumer sentiment data on Friday were also in focus for further signals about the U.S. economy's strength. (Reporting by Karen Brettell; editing by Jonathan Oatis) )

TREASURIES-Yields rise with inflation data, trade talks in focus

Feb 11 2019

(Adds quote, updates prices) * Inflation data on Wednesday next major economic focus * U.S. and China meet to discuss trade agreements * Senator says talks to avert another U.S. shutdown are stalled By Karen Brettell NEW YORK, Feb 11 U.S. Treasury yields edged higher on Monday as investors awaited data on Wednesday that will show inflation pressures in January, and as investors focused on trade talks between the United States and China. Yields have fallen as Federal Reserve officials, including Chairman Jerome Powell, adopt a much more dovish tone on further rate increases, and on concerns about slowing international growth. Consumer price data will be the next indication of whether prices are rising, a prerequisite for further rate hikes. “For the most part, we are kind of in a holding pattern until we get the CPI data later this week,” said Tom Simons, a money market economist at Jefferies in New York. “The burden of proof on inflation data now is to try to convince the market that things are going to turn around,” Simons said. However, “not only do you need to see more positive inflation data but you also need to see it over a number of months also, one individual print isn’t going to do it.” Benchmark 10-year notes fell 8/32 in price to yield 2.661 percent, up from 2.632 percent on Friday. The yields have fallen from 2.799 percent on Jan. 18 and are down from a seven-year high of 3.261 percent in October. Yields also rose as investors took profits after the notes on Friday tested technical support at around 2.62 percent. “Right now we are sitting near the Jan. 31st lows. We are seeing a bit of profit-taking today after those technical levels held on Friday,” said John Canavan, market strategist at Stone & McCarthy Research Associates in New York. China struck an upbeat note on Monday as trade talks resumed, but also expressed anger at a U.S. Navy mission through the disputed South China Sea, casting a shadow over the prospect for improved Beijing-Washington ties. The U.S. is expected to keep pressing longstanding demands that China reform how it treats American companies' intellectual property as the two countries work to seal a trade deal that could prevent tariffs from rising on Chinese imports. A trade deal between the two countries could be positive as it would bolster expectations of future inflation. Other potential market catalysts include talks to avert another U.S. government shutdown. The top four Democratic and Republican negotiators in the U.S. Congress on border security funding plan to meet on Monday in a bid to reach a deal by a Friday deadline to avert another partial government shutdown. (Additional reporting by Richard Leong in New York Editing by Nick Zieminski) )

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