January 24, 2019 / 9:00 PM / 8 months ago

TREASURIES-U.S. bond yields fall on trade, growth worries

    * Ross says U.S., China "miles and miles" apart on trade
    * ECB's Draghi says risk moved to downside
    * U.S. jobless claims fall to over 49-year low
    * U.S. to sell $113 bln in fixed-rate debt next week 

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Jan 24 (Reuters) - U.S. Treasury yields fell on
Thursday, with the 10-year's yield hitting a one-week low, as
anxiety about slowing global growth and trade tensions between
China and the United States renewed safe-haven demand for U.S.
government debt.
    Investor worries rose after U.S. Commerce Secretary Wilbur
Ross said the world's two biggest economies are "miles and
miles" from resolving their trade issues, although there is a
fair chance of reaching a deal.
    Across the Atlantic, European Central Bank President Mario
Draghi cautioned that regional economic risks shifted to the
downside and hinted the ECB would leave interest rates at record
lows "through" the summer.
    Business growth in the euro zone weakened to its lowest
reading since July 2013 in January, according to IHS Markit.

    "It's not just a European issue. We are talking about a
global slowdown," said Stan Shipley, a strategist at Evercore
ISI in New York.
    As other areas of the U.S. economy have weakened, the
American jobs market has remained a bright spot.
    The Labor Department said first-time filings for
unemployment benefits fell to 199,000 last week, the lowest
level in more than 49 years.
    The labor market has not been affected yet by the
historically long U.S. partial government shutdown that started
in late December. Economists have begun to downgrade their
estimates on gross domestic product for the first quarter.

    A dour economic outlook and trade and political
uncertainties "will act to keep bond yields down and keep them
in an overall sideway pattern," said Karl Haeling, vice
president at Landesbank Baden-Wurttemberg in New York. 
    The yield on benchmark 10-year Treasury notes
was 4.1 basis points lower at 2.714 percent. It hit a one-week
low of 2.700 percent earlier in the day.
    Two-year Treasury yields, which are sensitive to
traders' view on Federal Reserve policy, were down 2.7 basis
points at 2.564 percent.
    Interest rates futures implied traders expected an 18
percent chance the Fed would raise key lending rates by the end
of 2019, down from 24 percent late on Wednesday, according to
CME Group's FedWatch program.
    The Fed will hold its first policy meeting of 2019 next
week, on Tuesday and Wednesday.
    On the supply front, the Treasury Department will sell a
combined $113 billion in two-year, five-year and seven-year
fixed-rate securities, the same amount it auctioned in December.

    It also will sell $20 billion in two-year floating-rate
notes next week, up from $18 billion auctioned last month.

    
    Thursday, Jan. 24 at 1551 EST (2051 GMT):
                               Price                  
 US T BONDS MAR9               145-23/32    24/32     
 10YR TNotes MAR9              121-184/256  11/32     
                               Price        Current   Net
                                            Yield     Change
                                            (pct)     (bps)
 Three-month bills             2.32         2.3659    -0.044
 Six-month bills               2.44         2.5046    -0.008
 Two-year note                 99-225/256   2.5642    -0.027
 Three-year note               99-228/256   2.5383    -0.036
 Five-year note                100-90/256   2.5485    -0.043
 Seven-year note               100-8/256    2.6199    -0.045
 10-year note                  103-132/256  2.7139    -0.041
 30-year bond                  106-172/256  3.0332    -0.036
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       14.80        -0.70     
 30-year vs 5-year yield       48.40        0.00      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        15.00         0.00    
 spread                                               
 U.S. 3-year dollar swap        11.75         0.50    
 spread                                               
 U.S. 5-year dollar swap         8.00         0.25    
 spread                                               
 U.S. 10-year dollar swap        3.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -17.75         0.75    
 spread                                               
 
    

 (Reporting by Richard Leong; editing by Jonathan Oatis and
Leslie Adler)
  
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