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TREASURIES-Trump comments, geopolitical worries send U.S. yields to 5-month lows
April 13, 2017 / 7:23 PM / 5 months ago

TREASURIES-Trump comments, geopolitical worries send U.S. yields to 5-month lows

    * U.S. yield curve at flattest level since November
    * Benchmark yield books steepest weekly drop since Jan. 2016

 (Update market action, adds quote)
    By Richard Leong
    NEW YORK, April 13 (Reuters) - U.S. Treasury yields fell on
Thursday, with benchmark yields hitting near five-month lows as
President Donald Trump's favorable view of low interest rates
intensified a bond market rally that was underpinned by
geopolitical worries.
    The U.S. bond market closed early on Thursday, ending at 2
p.m. EDT (1800 GMT) ahead of the market holiday on Good Friday.
    Trump made comments saying he favored low interest rates in
a Wall Street Journal interview published late Wednesday. He
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.
    "There has been this flight to safety for bonds, with a lot
of geopolitical risks. Then you have comments from Trump in
favor of low rates and now he might keep Yellen," said Larry
Milstein, head of U.S. government and agency trading at R.W.
Pressprich & Co in New York.        
    The yield on 10-year Treasury notes fell 14
basis points, for the biggest weekly decline since January 2016,
while the gap between two-year and 10-year yields contracted to
under 103 basis points, the tightest since Nov. 9 after Trump's
presidential win.
    Trump's comments on interest rates and Yellen, as well as a
comment that the dollar was too strong, added to demand for
Treasuries on a safety bid by investors rattled by fears of
possible U.S. military action against Syria and North
Korea.
    Market participants have already been reconsidering how
quickly the Federal Reserve would lower rates, and they have
scaled expectations on the timing and size of tax cuts,
infrastructure spending and regulatory rollbacks, which Trump
had promised, investors said.
    "All those stories have been building for awhile. Trump's
comments yesterday were consistent with that but I don't think
it's the primary cause on what's going on," said John Bellows,
portfolio manager at Western Asset Management Co in Pasadena,
California.
    Investors have also worried about the upcoming French
presidential election on April 23. Recent opinion polls showed
the race tightening, and financial markets worried about the
rising popularity of far-left candidate Jean-Luc Melenchon, who
like far-right leader Marine Le Pen is anti-EU.
    Benchmark 10-year Treasury yields were down over
6 basis points, at 2.232 percent, after hitting 2.218 percent
earlier Thursday, which was the lowest level since Nov. 17.
    The 30-year bond yield was down over 4 basis
points, at 2.888 percent, after falling to 2.870 percent, a
level last seen on Nov. 10.
    
  Thursday, April 13 at 1442 EDT (1842 GMT): 
                               Price                   
 US T BONDS JUN7               153-27/32    0-27/32    
 10YR TNotes JUN7              125-252/256  0-132/256  
                               Price        Current    Net
                                            Yield      Change
                                            (pct)      (bps)
 Three-month bills             0.8          0.8127     -0.002
 Six-month bills               0.915        0.9319     -0.010
 Two-year note                 100-22/256   1.2053     -0.033
 Three-year note               100-68/256   1.4091     -0.054
 Five-year note                100-134/256  1.7641     -0.066
 Seven-year note               100-136/256  2.0426     -0.070
 10-year note                  100-40/256   2.232      -0.064
 30-year bond                  102-56/256   2.8884     -0.042
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        32.75         0.75     
 spread                                                
 U.S. 3-year dollar swap        26.25         1.25     
 spread                                                
 U.S. 5-year dollar swap        11.50         1.00     
 spread                                                
 U.S. 10-year dollar swap       -3.00         0.75     
 spread                                                
 U.S. 30-year dollar swap      -40.25         0.25     
 spread                                                
 
    

 (Reporting by Richard Leong; Editing by Chizu Nomiyama and
Leslie Adler)
  

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