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

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)