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TREASURIES-U.S. 30-year yields drop to record low; 10-year yields sink

Gertrude Chavez-Dreyfuss

* U.S. retail sales rise, initial claims weaker than expected

* U.S. yield curve steepens slightly

* U.S. 10-year yields fall to three-year low

(Adds market strategist's comments, updates prices) NEW YORK, Aug 15 (Reuters) - U.S. 30-year Treasury yields fell to a record low below 2% and benchmark 10-year notes dropped to a three-year trough on Thursday amid persistent worries about global trade tensions and economic slowdowns around the world. Yields on U.S. two-year notes also declined, sliding to a nearly two-year low. A day after inverting, the U.S. yield curve steepened a little. Curve inversion, which occurs when long-term yields dip below short-term ones, is widely considered a warning that the economy is headed for recession. U.S. yields fell further in mid-afternoon trading. Some analysts said the latest slide was due to a report from The Spectator that Federal Reserve Chairman Jerome Powell has banned any public appearances by any member of the central bank. The report also said appearances at conferences have been canceled, as well as scheduled interviews. Reuters, however, cannot verify the accuracy of the Spectator report. "Clearly that report moved the market: it moved Treasuries in particular," said Lou Brien, market strategist, at DRW Trading in Chicago. "One of the interpretation to the report is that it's a blackout period before a surprise move by the Fed." The Fed will have its next monetary policy meeting next month. In mid-afternoon trading, yields on the U.S. benchmark 10-year Treasury note hit three-year lows of 1.475%, not far from a record trough of 1.321 percent touched in early July 2016. Ten-year yields were last down 1.526%, from 1.581% late on Wednesday. Yields on 30-year bonds, which fell earlier to fresh record lows of 1.916%, were last at 1.981% from 2.027% on Wednesday. At the short end of the curve, U.S. 2-year yields fell to nearly two-year low of 1.467%. They were last down at 1.487% from Wednesday's 1.577%. "I don't think we have seen a bottom in yields yet," said Gary Pzegeo, head of fixed income at CIBC Private Wealth Management, in Boston. "We'll likely have a reaction from the Federal Reserve at the next meeting. That could be something that fuels further moves lower in parts of the yield curve depending on how aggressive a stance they take." Data showing U.S. retail sales increasing by more than expected last month earlier pushed yields a little higher from their lows. The retail numbers suggested fairly robust consumer spending that should help ease worries about a potential U.S. recession. U.S. retail sales rose 0.7% in July. Economists polled by Reuters had forecast retail sales rising 0.3%. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 1.0% last month after advancing by an unrevised 0.7% in June. "There's a lot of concerns out there. Basically today, when you traded down, there were buyers," said Justin Lederer, Treasury trader at Cantor Fitzgerald in New York. "It has been a ferocious bid. Even with stronger data, global rates are still heading lower."

August 15 Thursday 2:44 PM New York / 1844 GMT

Price Current NetYield % Change


Three-month bills 1.8625 1.9024 -0.057Six-month bills 1.8075 1.8545 -0.057Two-year note 100-126/256 1.4937 -0.083Three-year note 100-42/256 1.4439 -0.075Five-year note 101-148/256 1.4191 -0.069Seven-year note 102-160/256 1.4765 -0.05610-year note 100-228/256 1.5286 -0.05230-year bond 106 1.9836 -0.043


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 0.50 0.25


U.S. 3-year dollar swap -3.75 -0.25


U.S. 5-year dollar swap -6.75 0.00


U.S. 10-year dollar swap -12.00 -0.75


U.S. 30-year dollar swap -41.50 -0.75


(Reporting by Gertrude Chavez-Dreyfuss Editing by Chizu Nomiyama and Bernadette Baum)