October 18, 2019 / 1:29 PM / 4 months ago

TREASURIES-Yields edge lower as market awaits Brexit vote

* British parliament to vote on Brexit deal on Saturday

* Fed’s Clarida to speak on Friday

* Fed seen likely to cut rates this month

By Karen Brettell

NEW YORK, Oct 18 (Reuters) - U.S. Treasury yields fell on Friday as investors awaited a UK vote on Britain’s deal to leave the European Union this weekend, and a speech by a senior Federal Reserve official later in the day.

British Prime Minister Boris Johnson secured a Brexit deal with the EU on Thursday but must now get it approved by parliament in an extraordinary session to be held on Saturday, in order to pave the way for an orderly departure on Oct. 31.

If the agreement does not pass, the country may face a disorderly EU exit that would have an adverse impact on investment and economic growth.

The absence of an agreement would likely dent risk appetite and boost demand for safe haven U.S. bonds.

“The bigger picture is just headlines, especially Brexit and the vote tomorrow,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.

Benchmark 10-year notes were last up 2/32 in price to yield 1.748%, down from 1.755% on Thursday. The yields rose as high as 1.799% after the Brexit deal was announced on Thursday.

A speech on Friday by Federal Reserve Vice Chairman Richard Clarida will also be closely watched for indications on how many more rate cuts the central bank is likely to make in the near term.

Data on Wednesday showing that U.S. retail sales fell for the first time in seven months in September, adds to the case that the Fed is likely to cut rates at the conclusion of its meeting on Oct. 29-30.

“The retail sales was weak enough to really solidify at least a cut this month,” Lederer said.

Interest rate futures traders are pricing in an 85% likelihood of a cut this month, according to the CME Group’s FedWatch tool.

Investors are also focused on whether the United States and China will reach a deal to end their protracted trade war, which has been blamed for harming global growth.

Data on Friday showed that China’s third-quarter economic growth slowed more than expected to its weakest pace in almost three decades as the bruising U.S. trade war hit factory production, boosting the case for Beijing to roll out fresh support. (Editing by Susan Fenton) )

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