November 4, 2019 / 2:38 PM / 7 days ago

TREASURIES-Yields rise before supply, on trade optimism

    * Treasury to sell $84 bln in notes, bonds this week
    * Trade deal optimism reduces safe haven demand for bonds
    * ISM non-manufacturing data on Tuesday in focus

    By Karen Brettell
    NEW YORK, Nov 4 (Reuters) - U.S. Treasury yields rose on
Monday as the market prepared for the Treasury Department to
issue long-dated debt and as optimism that the United States and
China will reach a deal to de-escalate their trade war boosted
risk sentiment.
    The Treasury will sell $84 billion in notes and bonds this
week as part of its quarterly refinancing. The sales will
include $38 billion in three-year notes on Tuesday, $27 billion
in 10-year notes on Wednesday and $19 billion in 30-year bonds
on Thursday.             
    “The market is refocused on the refunding that’s going to
take place this week,” said Michael Lorizio, senior fixed income
trader at Manulife Asset Management in Boston.
    At the same time, optimism on a trade deal between the
United States and China reduced demand for safe haven U.S.
bonds.
    The United States and China on Friday said they made
progress in talks aimed at defusing a nearly 16-month-long trade
war that has harmed the global economy, and U.S. officials said
a deal could be signed this month.             
    Benchmark 10-year notes             fell 15/32 in price to
yield 1.779%, up from 1.728% late Friday.
    Risk appetite has also improved since U.S. jobs data on
Friday showed that job growth slowed less than expected in
October while wages rose.             
    The next major U.S. economic focus will be the Institute of
Supply Management’s (ISM) services report on Tuesday.
    The ISM said on Friday that the manufacturing sector
contracted for the third consecutive month in October.
            
    However, the service sector “is the larger portion of the
economy and with the weakness that we’ve seen in ISM
manufacturing if we see any sort of cracks in this measure, then
that could indicate that perhaps the economy is on a weaker
footing than we anticipated,” Lorizio said.
    The Federal Reserve last Wednesday cut rates for the third
time this year and indicated that further reductions may not be
forthcoming.             
    Investors remain concerned, however, that a slowing U.S.
economy may force the Fed’s hand. 

 (Editing by Susan Fenton)
  
 
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