August 23, 2017 / 1:29 PM / a year ago

TREASURIES-Yields fall as Trump signals possible government shutdown

    * Trump comments on government shutdown prompt safety buying
    * Yields on T-bills due in early October rise
    * Central bankers' Jackson Hole meeting in focus

    By Karen Brettell
    NEW YORK, Aug 23 (Reuters) - U.S. Treasury yields fell on
Wednesday as stocks weakened after U.S. President Donald Trump
said late on Tuesday that he would be willing to risk a
government shutdown to secure funding for a border wall, raising
fears of a bruising budget battle.
    The comments came as lawmakers face a deadline in late
September to raise the U.S. debt ceiling or risk defaulting on
debt payments.             
    “To the extent that equities are reacting to last night’s
speech … you can say that’s bleeding now into fixed-income,”
said Jim Vogel, an interest rate strategist at FTN Financial in
    Benchmark 10-year notes             were last up 9/32 in
price to yield 2.19 percent, down from 2.22 percent on Tuesday.
    Yields on Treasury bills that are due near when the
government is expected to run out of money also jumped. Yields
on bills due Oct. 5              rose as high as 1.14 percent,
the highest level since August 11.
    Treasury yields had risen earlier on Wednesday after private
sector surveys in Germany and France both showed strong growth
in August, boosting confidence in improving economic conditions
in the eurozone.                          
    Investors are next focused on this week’s annual central
banking conference in Jackson Hole, Wyoming, which begins on
Thursday, where Federal Reserve Chair Janet Yellen and European
Central Bank President Mario Draghi are both due to speak.
    Many analysts and investors have low expectations, however,
that much new information will be forthcoming from Yellen, with
attention more focused on whether Draghi will give any
indications the ECB is closer to paring bond purchases.
    Two sources have told Reuters that Draghi will not deliver
any new policy message at the event.             
    Draghi on Wednesday heralded unconventional monetary policy
as a success but cautioned that central banks need to carefully
weigh their policy steps as gaps in understanding the relatively
new tools remain.             
    Yields have held in a tight range since falling to almost
two-month lows on Friday on concerns about political discord in
Washington and tensions between the U.S. and North Korea.
    North Korean leader Kim Jong Un has ordered more solid-fuel
rocket engines, state media reported on Wednesday, as he pursues
nuclear and missile programs amid a standoff with Washington,
but there were signs of tension easing.             

 (Editing by Nick Zieminski)
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