April 9, 2018 / 2:24 PM / 3 months ago

TREASURIES-Yields rise as U.S. tries to ease trade tension with China

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 9 (Reuters) - U.S. benchmark Treasury yields
rose on Monday, on pace to advance for the fourth session in
five, as risk appetite rebounded after the United States eased
concerns about a potential trade conflict with China.
    The auction of $64 billion in Treasuries this week has also
weighed on prices, which move inversely to yields. Traders
typically sell Treasuries to push up the yield so they can buy
it at a lower price at the auction in a practice known as
"concession."
    The U.S. Treasury is set to auction $30 billion in U.S.
3-year notes on Tuesday, $21 bln in reopened 10-year notes on
Wednesday, and $13 billion in reopened 30-year bonds on
Thursday. 
    "The combination of conciliatory Trump tweets on the trade
front and the looming long-end supply ostensibly make it
difficult to be constructive on Treasuries as the week gets
underway," said Ian Lyngen, head of U.S. rates strategy at BMO
Capital Markets in New York.
    U.S. President Donald Trump predicted in Twitter posts on
Sunday that China would take down its trade barriers, expressing
optimism despite escalating trade tensions between the world's
two largest economies that have roiled global markets in the
past week.
    Trump's chief economic adviser, National Economic Council
Director Larry Kudlow, also eased fears of a trade war. He
repeated in an interview on CNN's State of the Union show on
Sunday, saying, "This process might turn out to be very benign
... Maybe China will want to come round and talk in earnest - so
far it hasn't, I hope it does."
    In mid-morning trading, U.S. 10-year yields rose to 2.800
percent, from 2.775 percent late on Friday.
    U.S. 30-year yields were also higher, at 3.040 percent
, from Friday's 3.017 percent.
    U.S. two-year yields climbed to 2.290 percent, up
from 2.274 percent late Friday.
    Despite the conciliatory tone from the U.S. government,
China remained hostile. On Monday, it stepped up its attacks on
the Trump administration over billions of dollars worth of
threatened tariffs, saying Washington is to blame for trade
frictions and repeating it was impossible to negotiate under
"current circumstances."
    This week, the Federal Reserve's minutes of its last policy
meeting are due to be released, coming after Fed Chairman Jay
Powell suggested a gradual pace of rate increases in the near
term.
    "The FOMC minutes to Powell's first meeting in March as
chairman could be interesting. Given that the Summary of
Economic Projections, dot plot, and the press conference from
that meeting are already well-documented, the minutes may only
provide just a little more color," said Action Economics in a
research note.
    
      April 9 Monday 10:14AM New York / 1414 GMT
                               Price                  
 US T BONDS JUN8               145-21/32    -0-12/32  
 10YR TNotes JUN8              120-208/256  -0-52/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.69         1.7204    0.000
 Six-month bills               1.87         1.9136    0.013
 Two-year note                 99-236/256   2.2905    0.016
 Three-year note               99-220/256   2.4247    0.023
 Five-year note                99-124/256   2.6111    0.024
 Seven-year note               99-80/256    2.7339    0.025
 10-year note                  99-144/256   2.8009    0.026
 30-year bond                  99-52/256    3.0407    0.024
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        30.75        -0.50    
 spread                                               
 U.S. 3-year dollar swap        25.25        -0.75    
 spread                                               
 U.S. 5-year dollar swap        13.25        -0.50    
 spread                                               
 U.S. 10-year dollar swap        2.50        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -16.25         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)
  
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