January 13, 2020 / 7:55 PM / 8 days ago

TREASURIES-U.S. yields rise as investors look to trade agreement

 (Adds analyst comment on bond demand, market activity)
    By Ross Kerber
    BOSTON, Jan 13 (Reuters) - U.S. Treasury yields climbed on
Monday as investors shifted their focus from Middle East
tensions to the expected signing of a trade deal between the
United States and China.
    The benchmark 10-year yield was up 1.5 basis
points in afternoon trading at 1.8423% as investors turned to
riskier assets as U.S. corporations start to report
fourth-quarter earnings this week.
    Major U.S. equity market indexes were also up on Monday
ahead of the signing of a U.S.-China Phase 1 trade deal expected
on Wednesday, a major step toward resolving a dispute that
threatened to hammer global growth and has boosted demand for
safer assets such as bonds.
    "The market has found at least a short-term comfort area,"
said Justin Lederer, a Cantor Fitzgerald Treasury analyst. 
    Protests against Iran's clerical rulers since the weekend
underscore that political uncertainties remain in the Middle
East.
    But that drama is focused within Iran, and at least from a
global financial standpoint, the tensions are "definitely
subsiding, at least for now," Lederer said.
    Wall Street was trading near record highs on Monday, powered
by increases in the shares of top tech companies, including
Apple Inc and Facebook Inc.
    Jonathan Cohn, Credit Suisse interest rate strategist, said
bond yields might be expected to climb even higher to attract
money out of booming equity markets. But he noted that demand
for debt has also stayed strong from investors like pension
funds and bond mutual funds.
    "That's helping temper the rise" in yields, Cohn said.
    Investors this week will focus on fourth-quarter earnings
from major U.S. banks JPMorgan Chase & Co, Morgan
Stanley, Goldman Sachs Group Inc and Wells Fargo &
Co starting on Tuesday.
    Analysts expect profits at S&P 500 companies to drop 0.6% in
a second straight quarterly decline, according to Refinitiv IBES
data, partly due to a strong quarter a year ago and also because
of a drag from energy and industrials, which have borne the
brunt of the trade war.
    The two-year U.S. Treasury yield, which typically moves in
step with interest rate expectations, was up 1.2 basis points to
1.5843% in afternoon trading.
     U.S. Federal Reserve policymakers have forecast an "almost
ideal" outcome in 2020, in which the U.S. labor market will stay
strong and inflation will approach the central bank's 2% target.
But officials should remember to consider potential risks,
Boston Federal Reserve Bank President Eric Rosengren cautioned
on Monday.
    
      January 13 Monday 2:38PM New York / 1938 GMT
                               Price                  
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5175       1.5484    0.010
 Six-month bills               1.5275       1.5647    0.018
 Two-year note                 100-20/256   1.5843    0.012
 Three-year note               99-182/256   1.5991    0.013
 Five-year note                100-124/256  1.6479    0.012
 Seven-year note               99-236/256   1.7619    0.017
 10-year note                  99-44/256    1.8423    0.015
 30-year bond                  101-148/256  2.3015    0.016
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.75        -0.25    
 spread                                               
 U.S. 3-year dollar swap         2.25         0.00    
 spread                                               
 U.S. 5-year dollar swap        -0.75         0.00    
 spread                                               
 U.S. 10-year dollar swap       -5.50         0.25    
 spread                                               
 U.S. 30-year dollar swap      -32.50         0.25    
 spread                                               
 
 (Reporting by Ross Kerber; Editing by Dan Grebler)
  
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