July 31, 2019 / 4:05 PM / 3 months ago

TREASURIES-U.S. yields fall as traders await possible Fed rate cut

    * German 10-year yields hit record lows   
    * Chicago PMI hits lowest level since December 2015
    * U.S. to sell $84 bln in debt next week at refunding

 (Updates market action, adds table, quote)
    By Richard Leong
    NEW YORK, July 31 (Reuters) - U.S. Treasury yields fell on
Wednesday as traders braced for   the Federal Reserve's first
interest rate cut in a decade to combat risk from trade disputes
and softening global demand.
    Traders were positioned for at least a quarter-point cut
from the Fed's current target range on key short-term rates at 2
p.m. (1800 GMT) following a two-day policy meeting.
    "We head into today's meeting 100% priced for a cut today
with the market giving a small probability for 50-basis points,"
said Gregory Faranello, head of U.S. rates at AmeriVet
Securities.
    At 11:46 a.m. (1546 GMT), benchmark 10-year Treasury yields
 were down 2.80 basis points at 2.034%.
    Two-year yields, which are sensitive to traders'
view on changes in Fed policy, were 2.80 basis points lower at
1.820%.
    In July, Treasuries have posted a 0.28% loss, reducing their
year-to-date return to 4.89%, according to an index compiled by
Barclays and Bloomberg.
     U.S. yields declined on Wednesday in step with their German
counterparts as traders bet the European Central Bank is
prepared to embark on more stimulus to foster business activity
and inflation across the euro zone. 
    Moreover, European yields decreased on worries about a
possible no-deal Brexit.
    Ten-year Bund yields hit -0.44%, a record low.
    Global bond yields have remained under pressure on worries
about the impact of trade tensions between China and the United
States.
    U.S. manufacturers especially in the Midwest have been hard
hit.
    The Chicago Purchasing Management Index, also known as the
Chicago Business Barometer, fell to 44.4 this month, the lowest
level since December 2015 from 49.7 in June.
    The poor regional factory figure was offset by a mildly
better-than-expected reading on domestic private employment in
July from payroll processor ADP.
    On the supply front, the U.S. Treasury Department said it
will sell as expected $84 billion in coupon-bearing debt next
week for its August refunding. It will repay $57.3 billion of
proceeds to bondholders and raise $26.7 billion in new cash.

  July 31 Wednesday 11:47AM New York / 1547 GMT
                               Price                  
 US T BONDS SEP9               155-6/32     18/32     
 10YR TNotes SEP9              127-140/256  7/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.015        2.0591    -0.036
 Six-month bills               2.005        2.0537    -0.034
 Two-year note                 99-221/256   1.82      -0.028
 Three-year note               99-232/256   1.7826    -0.032
 Five-year note                99-174/256   1.8173    -0.027
 Seven-year note               99-192/256   1.9133    -0.028
 10-year note                  103-4/256    2.0335    -0.028
 30-year bond                  106-148/256  2.558     -0.028
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       21.20        0.30      
 30-year vs 5-year yield       74.00        0.50      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         4.00         1.25    
 spread                                               
 U.S. 3-year dollar swap         1.00         1.25    
 spread                                               
 U.S. 5-year dollar swap        -3.00         0.50    
 spread                                               
 U.S. 10-year dollar swap       -8.50         0.25    
 spread                                               
 U.S. 30-year dollar swap      -37.50         0.00    
 spread                                               
 
    

    
 (Reporting by Richard Leong
Editing by Tom Brown)
  
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