November 7, 2019 / 8:09 PM / 7 days ago

TREASURIES-Yields surge on reports U.S., China to roll back tariffs

 (Adds quotes, auction results, updates prices)
    * Report that U.S., China to roll back tariffs
    * Benchmark yields highest since August 1
    * Treasury sells $19 bln 30-year bonds to strong demand 

    By Karen Brettell
    NEW YORK, Nov 7 (Reuters) - U.S. Treasury yields surged to
more than three-month highs on Thursday, exaggerated by
technical factors, as reports that a U.S.-China agreement to
roll back trade tariffs boosted global economic growth
expectations.
    Tariffs imposed during the months-long bilateral trade war
will be phased out, the Chinese commerce ministry said on
Thursday, without specifying a timetable.             
    An interim trade deal is widely expected to include a U.S.
pledge to scrap tariffs scheduled for Dec. 15 on about $156
billion worth of Chinese imports, including cellphones, laptop
computers and toys.
    "Global markets in general are looking towards where trade
goes," said Justin Lederer, an interest rates strategist at
Cantor Fitzgerald in New York.
    Trade tariffs have been blamed for slowing global growth and
their removal would provide a considerable boost to risk
appetite. But with no deal confirmed, analysts attributed much
of the bond sell-off to momentum as yields broke above technical
resistance.
    "There is no new information that justifies this scale of a
sell-off," said Jon Hill, an interest rate strategist at BMO
Capital Markets in New York. "What we saw throughout the morning
was a series of core technical supports get breached, and then
the price action began to feed upon itself."
    Benchmark 10-year note yields             rose to 1.973%,
the highest since Aug. 1, before falling back to 1.942%. They
are up from 1.812% late Wednesday.
    The yield increases accelerated once they broke above
1.908%, which was an interim high reached in September.
    The backup in yields helped attract buyers to the Treasury
Department's auction of $19 billion in 30-year bonds, which saw
strong demand from fund managers and central banks.             
    It was the final sale of $84 billion in coupon-bearing
supply this week. The government also sold $27 billion in
10-year notes on Wednesday to strong demand and $38 billion in
three-year notes on Tuesday to solid demand.             
            
    Investors are watching economic data for further clues on
whether the Federal Reserve is likely to make further interest
rate cuts.
    The U.S. central bank cut rates last week for the third time
this year and indicated that additional rate decreases may be
unlikely in the near term.
    The next major U.S. economic release will be consumer price
data for October released next Wednesday. 
    

 (Reporting by Karen Brettell; editing by Jonathan Oatis and
Richard Chang)
  
 
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