June 17, 2019 / 7:04 PM / 3 months ago

TREASURIES-U.S. yields ease on soft data ahead of Fed decision this week

 (Adds new comment, updates prices)
    * Fed not seen cutting rates this week
    * U.S. soft data pressures yields
    * U.S.' Ross says Trump ready to impose tariffs without
China deal

    By Gertrude Chavez-Dreyfuss
    NEW YORK, June 17 (Reuters) - U.S. Treasury yields fell on
Monday in choppy trading, weighed down by softer-than-expected
U.S. economic data and persistent pressure from the trade
conflict with China, as investors brace for this week's Federal
Reserve monetary policy meeting.
    The Fed is unlikely to cut interest rates this week, but its
statement will be analyzed for clues on possible near-term
easing moves, analysts said.
    Tom di Galoma, managing director at Seaport Global
Securities in New York, believes a generally stable U.S. stock
market should prevent the Fed from cutting rates on Wednesday. 
    "There is no doubt U.S. economic data is weakening, however,
it does not seem to be as alarming as the market has
discounted," he added, noting that Fed funds futures reflected a
 75 basis-point cut in the near term.
    Monday's sentiment was hurt somewhat by weaker-than-expected
U.S. economic data. 
    The New York Fed's business index showed a record fall this
month to its weakest level in more than 2-1/2 years, prompting a
fall in U.S. yields. The regional Fed's "Empire State" index on
current business conditions tumbled to -8.6 in June from 17.8 in
May.
    A gauge of U.S. home builder sentiment also fell in June,
with the National Association of Home Builders and Wells Fargo
saying their index of builder confidence in newly-built,
single-family homes fell to 64 from 66 in May.
    Action Economics said Monday's weak data was likely the
result of "escalating trade war fears and rising concerns over a
slowing in global growth."
    In afternoon trading, U.S. 10-year note yields fell to
2.085% from 2.094% late on Friday.
    Yields on U.S. 30-year bonds slipped to 2.576%,
from 2.593% on Friday
    On the short end of the curve, however, U.S. 2-year yields
were up at 1.864% from Friday's 1.851%.
    NatWest Markets, in a research note on Monday, reiterated
the consensus call for no interest rate cuts by the Fed on
Wednesday.
    "While the FOMC (Federal Open Market Committee) may see more
downside risks since the last meeting, economic conditions
rarely shift that quickly, which is why policymakers generally
move gradually," the bank said.
    Adding to the pressure on yields was disappointing news
coming out of the trade front, said Stan Shipley, fixed income
strategist at Evercore ISI in New York. 
    U.S. Commerce Secretary Wilbur Ross told CNBC on Monday
President Donald Trump is ready to proceed with tariffs on the
remaining $300 billion in Chinese goods in the absence of a
trade deal.
    
      June 17 Monday 2:48PM New York / 1848 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.1475       2.1886    0.007
 Six-month bills               2.14         2.1988    0.021
 Two-year note                 100-127/256  1.8646    0.014
 Three-year note               99-214/256   1.8066    0.011
 Five-year note                100-186/256  1.8457    0.000
 Seven-year note               101-20/256   1.9583    -0.003
 10-year note                  102-152/256  2.0838    -0.010
 30-year bond                  106-48/256   2.5769    -0.016
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         3.25         1.75    
 spread                                               
 U.S. 3-year dollar swap         2.00         1.50    
 spread                                               
 U.S. 5-year dollar swap        -1.25         1.00    
 spread                                               
 U.S. 10-year dollar swap       -6.00         1.25    
 spread                                               
 U.S. 30-year dollar swap      -32.00         1.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Nick
Zieminski, Susan Thomas and Cynthia Osterman)
  
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