April 12, 2017 / 8:11 PM / 3 months ago

TREASURIES-U.S. bond yields fall on Trump low-rate comments

5 Min Read

    * Trump tells WSJ: "I do like a low-interest rate policy."
    * U.S. sells $12 billion 30-year bonds to soggy bids
    * Worries about overseas conflicts underpin bond demand
    * U.S. bond market to close at 2 p.m. EDT (1800 GMT)
Thursday

 (Update market action, adds quote)
    By Richard Leong
    NEW YORK, April 12 (Reuters) - U.S. Treasury yields fell on
Wednesday with benchmark yields hitting a near five-month low,
prompted by comments by U.S. President Donald Trump on favoring
low interest rates made in a newspaper interview published in
late U.S. trading.
    "I do like a low-interest rate policy," Trump told the Wall
Street Journal.
    Trump also said he likes and respects Federal Reserve Chair
Janet Yellen, whose term ends in 2018, although he was critical
of her during his presidential campaign.
    "We rallied a bit on these remarks," said Gene Tannuzzo,
senior portfolio manager at Columbia Threadneedle in
Minneapolis. "This doesn't affect the Fed's plan on rate hikes.
The Fed wants to remain independent."
    Fed officials have signaled the U.S. central bank may raise
interest rates twice more by the end of 2017.
    Benchmark 10-year Treasury yields were 3 basis
points lower at 2.268 percent after hitting 2.259 percent, which
was the lowest since Nov. 17.
    The 30-year bond yield was down over 2 basis
points at 2.907 percent after falling to 2.902 percent, a level
last seen on Jan. 12.
    Trump's views on the Fed and interest rates, as well as the
dollar, came as bonds had traded earlier in a tight range with
safe-haven demand tied to international political worries
offsetting investor sales to make room for this week's $56
billion in coupon-bearing Treasuries supply.
    Investor anxiety about possible U.S. military showdowns
against Syria and North Korea remained at elevated levels as
they piled into Treasuries.
    There was some relief as U.S. Secretary of State Rex
Tillerson's closely watched visit to Russia did not lead to a
heightening of tensions. 
    Russian Foreign Minister Sergei Lavrov said some progress
had been made on Syria after holding talks with Tillerson.

    Also, some in the market cited Chinese President Xi
Jinping's phone call with Trump, in which Xi stressed the need
for a peaceful solution for the Korean peninsula.
    Adding to investor worries was a tightening race for the
French presidential election on April 23. Opinion polls stirred
concern that hard-left candidate Jean-Luc Melenchon and
far-right leader Marine Le Pen, who are both anti-EU, could end
up in a runoff next month.
    "The geopolitical tension has not escalated, but it's not
going away either," said Mary Anne Hurley, vice president of
fixed income at D.A. Davidson in Seattle.
    The U.S. bond market will shut early at 2 p.m. EDT (1800
GMT) on Thursday ahead of the market holiday on Good Friday. 
    
  Wednesday, April 12 at 1602 EDT (2002 GMT):
                               Price                  
 US T BONDS JUN7               153-13/32    0-14/32   
 10YR TNotes JUN7              125-188/256  0-64/256  
                               Price        Current   Net
                                            yield     change
                                            (pct)     (bps)
 Three-month bills             0.81         0.8229    0.000
 Six-month bills               0.925        0.9423    -0.003
 Two-year note                 100-16/256   1.2176    -0.016
 Three-year note               100-48/256   1.4358    -0.027
 Five-year note                100-94/256   1.7973    -0.035
 Seven-year note               100-72/256   2.0813    -0.029
 10-year note                  99-212/256   2.2694    -0.046
 30-year bond                  101-208/256  2.9086    -0.021
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        32.00        -0.25    
 spread                                               
 U.S. 3-year dollar swap        25.25         0.25    
 spread                                               
 U.S. 5-year dollar swap        10.50         0.50    
 spread                                               
 U.S. 10-year dollar swap       -4.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -40.75        -0.25    
 spread                                               
 
 (Reporting by Richard Leong; Editing by Chizu Nomiyama and
James Dalgleish)
  

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