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TREASURIES-U.S. bond yields rise as Wall Street rebounds

Richard Leong

* Latest 30-year bond sold at lowest yield in three years

* U.S. jobless claims unexpectedly fell last week

* Germany may consider new debt for climate plan -official

* Italy's deputy prime minister Salvini wants new elections

(Updates market action, adds quote) NEW YORK, Aug 8 (Reuters) - U.S. Treasury yields rose on Thursday, with 30-year yields climbing from a near-record low, as traders scaled back safe-haven holdings of U.S. government debt as Wall Street continued to rebound from a recent rout. Fears about a global downturn, exacerbated by the trade tensions between China and the United States, had sparked a sharp sell-off in stock markets and stoked a rush into Treasuries, yen, gold and other perceived safe assets. Even so, the safe-haven appeal of Treasuries for investors has not gone away as fears of a downturn continue to overhang the market and threaten the possibility of another stock market sell-off. "The only hedge to equity underperformance are bonds," said Priya Misra, head of global rates strategy at TD Securities. "People are looking at any backup in yields as a buying opportunity." The rise in bond yields started overnight in overseas bond markets. German yields moved up from record lows in response to better-than-expected Chinese trade data and a steadying of China's yuans currency. Global yields also got a lift after Reuters reported that Germany is considering whether to issue new debt to fund a climate protection program, according to a senior government official. A surprise drop in U.S. jobless claims last week also allayed fears of a recession. Bond yields retreated from their session highs even after a mediocre $19 billion 30-year bond auction. Some safe-haven demand for Treasuries returned in late U.S. trading after Italian deputy prime minister Matteo Salvini said the country's governing coalition had broken down and the only way forward was to hold new elections. In late U.S. trading, the yield on the 30-year, or long, bond was up 3.5 basis points at 2.230%, while on Wall Street the S&P 500 was up 1.9%. On Wednesday, the 30-year yield fell to 2.123%, within striking distance of an all-time low of 2.089% set in July 2016, according to Refinitiv data. Benchmark 10-year Treasury yields were 2.6 basis points higher at 1.717% after hitting 1.595% on Wednesday, which was their lowest level since October 2016. Longer-dated U.S. yields faced additional upward pressure from this week's debt supply for the government's $84 billion quarterly refunding. Investor demand for $19 billion in the latest 30-year bond on Thursday and $27 billion in 10-year Treasuries on Wednesday turned out softer than expected. On the short-end of the yield curve, the margin of three-month T-bill rates over 10-year note yields shrank to 29 basis points after touching 40 basis points a day earlier, which was the highest level in 12-1/2 years. An inversion between these two maturities has preceded a recession in the past 50 years.

Thursday, Aug. 8, at 1541 EDT (1941 GMT): Price

US T BONDS SEP9 161-13/32 -26/3210YR TNotes SEP9 129-224/256 -9/32Price Current NetYield % Change

(bps)

Three-month bills 1.9775 2.0149 -0.006Six-month bills 1.9125 1.9633 0.020Two-year note 100-63/256 1.6228 0.052Three-year note 99-218/256 1.5508 0.046Five-year note 100-250/256 1.5453 0.043Seven-year note 101-168/256 1.6229 0.03810-year note 99-24/256 1.724 0.03330-year bond 113-188/256 2.2402 0.045YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 9.90 -2.5530-year vs 5-year yield 69.40 -0.65

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap -3.25 -1.00

spread

U.S. 3-year dollar swap -5.25 0.00

spread

U.S. 5-year dollar swap -8.00 0.25

spread

U.S. 10-year dollar swap -13.25 -0.25

spread

U.S. 30-year dollar swap -43.00 -1.25

spread

(Reporting by Richard Leong; Editing by Susan Thomas and Leslie Adler)