June 17, 2019 / 4:14 PM / 3 months ago

TREASURIES-U.S. yields slide on weak data ahead of Fed decision this week

 (Recasts, adds new comments, 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 slipped
on Monday in choppy trading, weighed down by
softer-than-expected U.S. economic data and persistent pressure
arising 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 the U.S. economic data is weakening,
however, it does not seem to be as alarming as the market has
discounted due to Fed funds reflecting a 75 basis-point cut
near-term," he added.
    Monday's sentiment has been darkened somewhat by weak U.S.
economic data and persistent pressure emanating from the trade
conflict with China.
    Data on the New York Fed's business index showed a record
fall this month, its weakest level in more than 2-1/2 years,
prompting an earlier 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.
    In addition, a gauge of U.S. home builder sentiment 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 midday trading, U.S. 10-year note yields fell to 2.082%
 from 2.094% late on Monday.
    Yields on U.S. 30-year bonds slipped to 2.576%,
from 2.593% on Monday.
    On the short end of the curve, U.S. 2-year yields were down
at 1.856% from Monday's 1.851%.
    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.
    Despite Monday's negative sentiment, Evercore's Shipley said
the odds are low for an easing this week.
    "The Fed will probably set the conditions where they could
ease in July," said Shipley. "That is probably tied to inflation
 and economic growth. So you're going to need a strong snapback
in jobs, retail sales, and inflation and it doesn't look like
you're going to get that."
      June 17 Monday 11:58AM New York / 1558 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             2.145        2.186     0.004
 Six-month bills               2.135        2.1936    0.016
 Two-year note                 100-131/256  1.8565    0.006
 Three-year note               99-222/256   1.7958    0.000
 Five-year note                100-196/256  1.8374    -0.009
 Seven-year note               101-36/256   1.9487    -0.012
 10-year note                  102-160/256  2.0803    -0.014
 30-year bond                  106-48/256   2.5769    -0.016
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         2.75         1.25    
 U.S. 3-year dollar swap         1.50         1.00    
 U.S. 5-year dollar swap        -2.00         0.25    
 U.S. 10-year dollar swap       -7.25         0.00    
 U.S. 30-year dollar swap      -33.50        -0.25    

 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski and Susan Thomas)
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