November 21, 2019 / 9:07 PM / 24 days ago

TREASURIES-U.S. yields advance as positive China trade news lift sentiment

    * China says will try to reach phase one trade deal
    * U.S. economic data were mixed, had little impact on
Treasuries
    * U.S. yield curve steepens

 (Updates prices, adds new comment)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 21 (Reuters) - U.S. Treasury yields rose on
Thursday after falling for three straight sessions, bolstered by
more positive news on U.S.- China trade negotiations and the
unwinding of most of this week's safe-haven demand.
    The Chinese commerce ministry said on Thursday Beijing will
strive to reach an initial bilateral trade agreement as both
sides keep communication channels open.
    Gao Feng, spokesman at the ministry, told reporters China
will try hard to reach a "phase one" deal.
    "The Chinese comment ... is, I guess, less negative than the
headlines that hit yesterday," said Ellis Phifer, market
strategist, at Raymond James in Memphis, Tennessee.
    "You got a lot of machines moving, a lot of algos moving - I
guess that had a lot to do with yesterday's moves. So today's
headlines have given a near-term calming effect to the market,"
he added.
    Thursday's remarks from China came after a series of
headlines earlier this week that suggested ongoing trade talks
were unraveling, prompting a safe-haven rally in U.S.
Treasuries.
    Some market participants said the steep rise in Treasury
prices on Wednesday that pushed U.S. long-term yields to
three-week lows were driven by so-called algorithmic or
systematic traders.
    Reuters reported on Wednesday that negotiations to finalize
a deal may extend into next year as Beijing presses for more
extensive tariff rollbacks.
    That news came after the U.S. Senate on Tuesday unanimously
passed legislation aimed at protecting human rights in Hong
Kong, provoking a strong reaction from China.
    Overall, Raymond James' Phifer believes a "phase one" deal
will eventually get done. "I think it helps both economies if
they get some of the uncertainty out of the way."
    But said he did not think a big trade deal was coming.
    "I think the U.S. and China would continue talking after a
preliminary deal. And we will have the same ups and downs like
what we're getting right now," Phifer said.
    With bond investors focused on trade, Thursday's mixed
economic data had little impact on the Treasury market.
    Initial U.S. weekly jobless claims were unexpectedly
unchanged at a five-month high last week, suggesting some
softening in the labor market.
    Other reports though showed a mild pick up in factory
activity in the mid-Atlantic region this month, but 
manufacturers reported a sharp slowdown in new orders, shipments
and unfilled orders.
    In afternoon trading, U.S. 10-year note yields
rose to 1.774%, up from Wednesday's 1.738%.
    Yields on 30-year bonds were up  at 2.235%, up
from 2.203% on Wednesday.
    On the short-end of the curve, U.S. two-year yields edged up
to 1.606%, from Wednesday's 1.572%.
    The yield curve steepened on Thursday on more upbeat trade
news, reversing six straight sessions of flattening. The spread
between the two-year and 10-year note yields widened to as much
as 16.90 basis points.
    
      November 21 Thursday 3:46 PM New York/2046 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.545        1.5768    0.005
 Six-month bills               1.5525       1.5908    0.013
 Two-year note                 99-204/256   1.6066    0.035
 Three-year note               100-24/256   1.5926    0.033
 Five-year note                99-118/256   1.6139    0.030
 Seven-year note               99-124/256   1.704     0.035
 10-year note                  99-208/256   1.7706    0.033
 30-year bond                  103-32/256   2.2315    0.028
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -2.50        -1.00    
 spread                                               
 U.S. 3-year dollar swap        -5.00        -0.75    
 spread                                               
 U.S. 5-year dollar swap        -7.50        -0.50    
 spread                                               
 U.S. 10-year dollar swap      -11.50        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -38.75         0.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski and Richard Chang)
  
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