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TREASURIES-U.S. yields fall on trade jitters; 3-year auction mediocre

the end of the week, and would "soon" target remaining

* U.S. to sell $38 bln 3-year notes to mediocre demand

* U.S.-China trade jitters stoke safe-haven demand for bonds

* Longer-dated Treasury yields fall to five-week lows

* Investors most neutral on Treasuries in five weeks - JPMorgan

(Updates market action, adds quote) NEW YORK, May 7 (Reuters) - U.S. Treasury yields fell on Tuesday with longer-dated yields hitting five-week lows as worries about renewed trade tension between China and the United States and its impact on global economic growth spurred safe-haven demand for bonds. A demand pickup for Treasuries, which have driven up the bond prices, reined in bidding for $38 billion of three-year government note supply, the first leg of this week's $84 billion quarterly refunding. On Sunday, U.S. President Donald Trump threatened to raise tariffs on $200 billion worth of Chinese goods to 25% from 10% Chinese imports with tariffs. The surprise decision cast doubts over the world's two biggest economies reaching a trade agreement any time soon, spurring investors to sell stocks and other risky assets and to flock into bonds. "Without a trade deal and a round of tariffs, that will have impact on economic growth," said Mary Ann Hurley, vice president of fixed income at D.A. Davidson in Seattle. "That's positive for bonds." The yields on benchmark 10-year Treasury notes touched a five-week low at 2.444% before retracing to 2.4495%, which was down 5 basis points from late on Monday. Thirty-year yields were last at 4.4 basis points lower at 2.8635% after hitting a five-week low at 2.857%. Investors turned the most neutral in five weeks on longer-dated Treasuries after an overall upbeat payrolls report in April on Friday and the Federal Reserve's signal that it sees no reason to raise or cut interest rates right now, according to a J.P. Morgan survey released on Tuesday. Wall Street's major indexes tumbled more than 2%, adding to Monday's losses. Traders are pinning hopes that a deal is still within reach after Beijing said earlier on Tuesday that Chinese Vice Premier Liu He will visit the United States this week for trade talks.

This safe-haven demand for Treasuries due to trade worries has complicated this week's refunding, which was expected to refund $55.4 billion to bondholders and to raise $28.6 billion in new cash for the federal government. The latest three-year note issue fetched mediocre demand, according to traders, resulting in the lowest yield at an auction for this maturity in 16 months. The Treasury will sell $27 billion in 10-year notes on Wednesday and $19 billion in 30-year bonds on Thursday. May 7 Tuesday 2:57PM New York / 1857 GMT Price

US T BONDS JUN9 148-22/32 28/3210YR TNotes JUN9 124 12/32Price Current NetYield % Change


Three-month bills 2.3775 2.4253 -0.001Six-month bills 2.375 2.4373 -0.014Two-year note 99-240/256 2.2824 -0.027Three-year note 100-6/256 2.2415 -0.036Five-year note 99-252/256 2.2533 -0.040Seven-year note 100-48/256 2.3457 -0.04910-year note 101-132/256 2.4495 -0.05030-year bond 102-184/256 2.8635 -0.044YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 16.60 -1.1030-year vs 5-year yield 60.90 -1.50


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 9.75 -0.25


U.S. 3-year dollar swap 6.50 -0.25


U.S. 5-year dollar swap 3.50 -0.75


U.S. 10-year dollar swap -2.25 0.00


U.S. 30-year dollar swap -25.25 0.00


(Reporting by Richard Leong Editing by Chizu Nomiyama and Susan Thomas)