November 29, 2019 / 2:50 PM / 13 days ago

TREASURIES-Yield edge higher, U.S.-China talks in focus

    * Geopolitical tensions between U.S., China in focus
    * Month-end demand helps bond markets
    * Next week's jobs report next major economic focus

    By Karen Brettell
    NEW YORK, Nov 29 (Reuters) - U.S. Treasury yields inched
higher on Friday, erasing an earlier fall after China said it
would retaliate to the United States passing legislation backing
anti-government protestors in Hong Kong, potentially reducing
the chance that the two countries will reach a deal to
deescalate their trade war.
    Bond yields fell overnight after China said on Thursday that
it would take "firm counter measures" in response to U.S.
legislation, and that attempts to interfere in the Chinese-ruled
city were doomed to fail.
    It comes after officials in both countries have talked up
the odds that the U.S. and China will reach a “phase one” trade
deal, which may include a rollback in tariffs placed on each
others’ goods.
    Benchmark 10-year note yields were last 1.774%,
up from 1.767% late Wednesday. The bond market was closed on
Thursday for the Thanksgiving Day holiday and will close early
at 2:00 pm EST on Friday.
    Trading volumes were light as many traders and investors
remained on holiday between Thanksgiving Day and the weekend.
    Month-end demand by investors rebalancing bond portfolios
was seen as helping demand for bonds on Friday.
    The New York Federal Reserve also injected $88.45 billion in
liquidity into the overnight repurchase agreement market on
Friday as part of its ongoing operations to support short-term
funding markets.
    Funding stresses in September prompted the Federal Reserve
to intervene and it has pledged to continue the operations
through the year-end period, when banks and other investors
reduce risk taking, which can elevate funding stresses.
    The next major U.S. economic focus will be the jobs report
for November, which will be released next Friday.
    
    November 29 Friday 9:27AM New York / 1427 GMT
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             1.565        1.5928    -0.015
 Six-month bills               1.5825       1.6216    0.003
 Two-year note                 99-192/256   1.6279    0.002
 Three-year note               100          1.6249    0.008
 Five-year note                99-92/256    1.6341    0.010
 Seven-year note               99-88/256    1.725     0.006
 10-year note                  99-200/256   1.774     0.007
 30-year bond                  103-236/256  2.1956    0.004
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         0.25         0.00    
 spread                                               
 U.S. 3-year dollar swap        -3.25         0.00    
 spread                                               
 U.S. 5-year dollar swap        -4.75         0.00    
 spread                                               
 U.S. 10-year dollar swap       -8.25        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -33.25         0.25    
 spread                                               
 
    

 (Editing by Chizu Nomiyama)
  
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