August 19, 2019 / 6:41 PM / 2 months ago

TREASURIES-Yields rise as Treasury considers ultra-long bonds

 (Updates prices)
    * Treasury reopens queries into 50-, 100-year bonds
    * Stocks boosted by Chinese rate reform, German fiscal hopes
    * Fed Chairman Powell to speak at Jackson Hole on Friday

    By Karen Brettell
    NEW YORK, Aug 19 (Reuters) - U.S. Treasury yields rose on
Monday after the Treasury Department late on Friday said it was
gauging market interest in ultra-long-dated debt, and as risk
sentiment improved.
    The Treasury said it wants to “refresh its understanding of
market appetite” for 50-year or 100-year year bonds. It came
after 30-year bond yields fell to record lows last week on
concerns about slowing growth.
    The United States has previously considered issuing
ultra-long bonds, though the idea was shot down in 2017 by the
Treasury Borrowing Advisory Committee, a group of banks and
asset managers that advise the Treasury on its debt strategy.
    The committee said at the time that there was no “evidence
of strong or sustainable demand for maturities beyond 30 years.”
    “We had the news on Friday afternoon that Treasury is
reengaging people on the possibility of an ultra-long Treasury,
and that set off a bad Treasury tone that carried overnight,"
said Jim Vogel, an interest rate strategist at FTN Financial in
Memphis, Tennessee.
    It "then got aggravated by the better risk appetite that
we’re seeing in equities,” Vogel said.
    Chinese interest rate reform and hopes of fiscal stimulus in
Germany boosted risk sentiment on Monday and reduced demand for
safe-haven U.S. debt.                          
    Central banks globally are expected to adopt increasingly
dovish monetary policies as economic data worsens.
    But with much of the European government bond market
offering negative yields, there is concern that central banks
are out of ammunition and that governments will need to turn to
fiscal stimulus to bolster their economies.
    The U.S. Federal Reserve is seen as certain to cut rates
when it meets next month, despite saying in July that further
rate decreases may not be needed following its first cut in over
a decade.
    Fed Chairman Jerome Powell is due to speak at the Fed’s
economic symposium in Jackson Hole, Wyoming, on Friday. His
comments will be closely evaluated for any shift in his stance
on future easing.
    Benchmark 10-year notes             were last down 16/32 in
price to yield 1.593%. The yields have risen from a three-year
low of 1.475% on Thursday.
    The yield curve between 2-year and 10-year notes
               flattened to 6 basis points, after steepening as
far as 10 basis points earlier on Monday. The curve inverted on
Wednesday for the first time since 2007, signaling a recession
is likely in one to two years.

 (Reporting by Karen Brettell; editing by Jonathan Oatis and
Nick Zieminski)
  
 
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