December 1, 2017 / 5:30 PM / a year ago

TREASURIES-Yields drop after ABC reports ex-adviser Flynn to testify against Trump

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    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 1 (Reuters) - U.S. Treasury yields plunged on
Friday after ABC News reported that Michael Flynn, a former
adviser to U.S. President Donald Trump, said he was prepared to
testify that Trump directed him to make contact with the
Russians when he was a presidential candidate.
    Reuters could not immediately verify the report.
    Flynn on Friday pleaded guilty to lying to the Federal
Bureau of Investigation and said he would cooperate with a probe
 into possible ties between Russia and the Trump administration.

    The benchmark 10-year Treasury yield dropped to
a low of 2.315 percent after the news, from 2.415 percent late
on Thursday. U.S. 30-year bond yields plunged to
2.716 percent, the lowest since Sept. 11, from Thursday's 2.831
    "There's political drama swirling around the market now. The
market hasn't priced in a former national security advisor
testifying against the President," said Michael Antonelli,
managing director at institutional sales trading at Robert W.
Baird in Milwaukee.
    "It potentially jeopardizes tax reform and the agenda of the
administration and potentially reignites the bitter debate
around the election. The Russian interference story never seems
to go away."
    The market has been focused on tax reform this week, with
yields tracking the highs and lows of the bill as lawmakers
battled over it.
    Just before the Flynn news came out, yields were higher on
the day as it looked like the U.S. Senate tax bill would be
approved on Friday. 
    "This could well be damaging not only for the president
himself but for the future of that tax bill," said James Hughes,
chief market analyst at AxiTrader in London.

    December 1 Friday 11:50AM New York / 1650 GMT
 US T BONDS MAR8               153-23/32    2         
 10YR TNotes DEC7              124-228/256  0-148/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.25         1.2712    0.002
 Six-month bills               1.415        1.4448    0.000
 Two-year note                 99-252/256   1.758     -0.032
 Three-year note               99-174/256   1.862     -0.041
 Five-year note                99-152/256   2.0861    -0.058
 Seven-year note               99-64/256    2.2415    -0.074
 10-year note                  99-56/256    2.3384    -0.077
 30-year bond                  100-52/256   2.74      -0.091
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        18.25        -0.25    
 U.S. 3-year dollar swap        17.75        -0.50    
 U.S. 5-year dollar swap         5.75         0.00    
 U.S. 10-year dollar swap       -0.25         0.50    
 U.S. 30-year dollar swap      -22.50         0.50    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Sinead Carew; Editing by Chizu Nomiyama and Andrea Ricci)
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