March 27, 2019 / 6:20 PM / 5 months ago

TREASURIES-Yields fall to 15-month lows on global central bank dovishness

 (Adds auction results, updates prices)
    * New Zealand central bank unexpectedly adopts dovish tone
    * ECB's Draghi says could further delay rate increase
    * Treasury sells $41 bln five-year notes to solid demand

    By Karen Brettell
    NEW YORK, March 27 (Reuters) - Benchmark 10-year Treasury
yields fell to 15-month lows on Wednesday as the New Zealand and
European central banks adopted a dovish tone on interest rates
and investors worried about a global recession.
    New Zealand's central bank unexpectedly said its next rate
move was likely to be a cut, abandoning its neutral stance at a
policy review.             
    The European Central Bank could further delay an interest
rate increase and may look at measures to mitigate the
side-effects of negative interest rates, ECB President Mario
Draghi said.             
    Germany, meanwhile, sold debt with a negative yield for the
first time since 2016.             
    "There's two conflicting stories here. One is that the Fed
and global central banks are keeping rates on hold, and that's
creating a very supportive backdrop," said Gennadiy Goldberg, an
interest rate strategist at TD Securities in New York.
    "The other story is they are doing this because they expect
weakening and that the next move from here is a global
recession," Goldberg said.
    Treasury prices have rallied strongly since the Federal
Reserve last Wednesday dramatically abandoned projections for
any interest rate hikes this year.             
    Interest rate futures traders are now pricing in a 64
percent chance of a rate cut by December, according to the CME
Group's FedWatch Tool.
    Ten-year Treasuries             gained 8/32 in price to
yield 2.386 percent, after falling to 2.352 percent overnight,
the lowest since December 2017.
    The yield curve between three-month bills and 10-year notes 
extended its inversion to 10 basis points, before retracing back
to six basis points. The inversion, if it persists, could
indicate that a recession is likely in one to two years.
    The Treasury Department sold $41 billion in five-year notes
to solid demand on Wednesday, the second sale of $113 billion in
coupon-bearing supply this week.
    The high yield was less than one basis point above where the
notes traded before the auction.             
    It comes after a $40 billion auction of two-year notes on
Tuesday met with strong demand.             
    The Treasury will also sell $32 billion in seven-year notes
on Thursday.

 (Editing by Richard Chang)
  
 
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