May 23, 2019 / 7:22 PM / 4 months ago

TREASURIES-U.S. yields plummet on trade war, growth worries

    * U.S. 30-year, 10-year yields drop to 17-month, 19-month
lows
    * U.S. two-year yields fall to 15-month trough
    * U.S., China exchange barbs in escalating trade war
    * Thursday's U.S. dats shows weakness 

 (Adds new comment, details, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 23 (Reuters) - U.S. Treasury yields dropped
across the board on Thursday as risk appetite faded amid
continued concerns about global growth and a worsening trade
conflict between the United States and China.
    U.S. 30-year bond yields sank to roughly 17-month lows,
while those on benchmark 10-year notes fell to their lowest
level since October 2017, as shares around the world took a nose
dive.
    U.S. 2-year yields, the note most sensitive to the interest
rate outlook, sagged to their weakest level since February 2018.
    In another sign of growing market anxiety, two yield curve
indicators inverted on Thursday.
    "This is mostly trade tensions and global growth fears. But
trade tension is the big one because that's pulling down 
equities considerably," said Kim Rupert, managing director of
global fixed income at Action Economics in San Francisco. 
    Investors worried that the U.S.-China trade spat could
intensify and further undermine global growth. 
    The United States and China had a heated exchange on
Thursday, with U.S. Secretary of State Mike Pompeo accusing
Chinese telecom giant Huawei Technologies          of lying
about its ties to the government and Beijing saying Washington
must end its "wrong actions" if it wanted trade talks to
continue.
    In late trading, U.S. 10-year note yields fell to 2.293%
 from 2.393% late on Wednesday, after earlier sliding
to 2.292%, its lowest since October 2017.
    Action Economics' Rupert said she is hearing that the
10-year yield could hit 2.20% and 2% for the two-year note. 
    Yields on U.S. 30-year bonds slid to 2.735%, 
from 2.819% on Wednesday, after earlier sliding to 2.731%, a
17-month low.
    On the short end of the curve, U.S. 2-year yields were down
at 2.129% from Wednesday's 2.231%. Two-year yields
earlier dropped to a 15-month trough of 2.121%.
    In addition, two yield curve measures inverted on Thursday.
The gap in yield between U.S. 3-month and 10-year notes, as well
as that between 2-year and 5-year notes fell,
suggesting expectations of slower economic growth.
    "The 2s/5s inversion is in mini-panic mode, one reason to
term this morning a risk-off move even though it has its
rationale in fundamentals more than events," said Jim Vogel,
senior rates strategist, at FTN Financial in Memphis, Tennessee.
    "In this case, events are a contributor," he added.
    Britain's trouble-plagued attempt to leave the European
Union has also helped boost U.S. bond prices.
    Prime Minister Theresa May tenuously held on to power on
Thursday after her final Brexit gambit backfired. May's
departure will deepen the Brexit crisis as a new leader is
likely to want a more decisive split.
    U.S. yields fell as well after a pair of U.S. economic data
-- manufacturing activity, new home sales -- showed weakness.

    
      May 23 Thursday 3:09PM New York / 1909 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.3125       2.3583    -0.020
 Six-month bills               2.325        2.3917    -0.015
 Two-year note                 100-58/256   2.1295    -0.102
 Three-year note               100-42/256   2.0678    -0.103
 Five-year note                100-194/256  2.0875    -0.101
 Seven-year note               101-56/256   2.1845    -0.099
 10-year note                  100-180/256  2.2957    -0.097
 30-year bond                  102-220/256  2.7346    -0.084
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         4.50        -1.00    
 spread                                               
 U.S. 3-year dollar swap         2.75        -1.25    
 spread                                               
 U.S. 5-year dollar swap         0.00        -1.00    
 spread                                               
 U.S. 10-year dollar swap       -5.75        -1.00    
 spread                                               
 U.S. 30-year dollar swap      -29.25        -1.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski and Susan Thomas)
  
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