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TREASURIES-U.S. bond yields flat as trade jitters diminish

Reuters.

* Fresh U.S. levies on Chinese goods go into effect

* U.S., Chinese negotiators ink no trade deal, talks to continue

* Trump suggests in tweets tariffs may or may not be removed

* U.S. CPI rises in April, underlying inflation stays benign

(Updates market action, adds quote, graphics) NEW YORK, May 10 (Reuters) - U.S. Treasury yields were little changed on Friday, with longer-dated yields hovering at five-week lows, as worries about trade tension between China and the United States simmered down even in the absence of a deal following two-days of negotiations. Reduced anxiety about a trade war between the world's two biggest economies offset mildly disappointing data that showed domestic inflation rose less than market expectations. The United States escalated a tariff war with China on Friday by raising duties on $200 billion worth of Chinese goods, and China is expected to retaliate. Both sides said the latest round of talks went well enough for further discussions. President Donald Trump said on Twitter on Friday the new tariffs on Chinese goods may or may not be removed depending on future talks. Still, doubts persist over an imminent agreement to resolve the two nations' trade differences. "No progress has been made. Now negotiations are going to Beijing. This seems like they will drag on," said Subadra Rajappa, head of U.S. rates strategy at SG Corporate & Investment Banking in New York. In late U.S. trading, benchmark 10-year Treasury yields edged up 0.3 basis point to 2.4601%. They fell to a five-week low of 2.424% on Thursday. On the week, 10-year yields fell 7 basis points, the steepest drop in seven weeks. Two-year Treasury yields dipped 1 basis point to 2.2579%, bringing its weekly decline to 8 basis points. Wall Street's main index ended higher on the day with the S&P 500 gaining over 0.4%. U.S. bond yields had fallen earlier on Friday in reaction to a mildly weaker-than-forecast report on U.S. consumer prices. The government's consumer price index increased 0.3% in April, less than the 0.4% increase forecast by analysts polled The latest CPI reading reinforced the notion that the Federal Reserve would leave key lending rates unchanged this year, although the futures market still implied traders expect a 60% chance of a rate cut at the end of the year. "For the Fed, the disappointment in the April CPI report is not likely to materially change the clear majority view that some significant part of recent soft inflation numbers is transitory," TD Securities analysts wrote in a research note. May 10 Friday 3:50PM New York / 1950 GMT Price

US T BONDS JUN9 148-20/32 -2/3210YR TNotes JUN9 123-244/256 -1/32Price Current NetYield % Change

(bps)

Three-month bills 2.3775 2.4244 -0.010Six-month bills 2.38 2.4418 -0.007Two-year note 99-252/256 2.2579 -0.010Three-year note 99-184/256 2.2224 -0.003Five-year note 99-250/256 2.2549 0.002Seven-year note 100-38/256 2.3517 0.00410-year note 99-64/256 2.4601 0.00330-year bond 99-236/256 2.8789 -0.002YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 19.90 1.6530-year vs 5-year yield 62.20 0.80

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 9.75 0.25

spread

U.S. 3-year dollar swap 7.25 0.25

spread

U.S. 5-year dollar swap 3.75 0.25

spread

U.S. 10-year dollar swap -2.00 0.25

spread

U.S. 30-year dollar swap -25.75 0.25

spread

(Reporting by Richard Leong; editing by Jonathan Oatis and Susan Thomas)