Top Stories
Top Stories
Wires

TREASURIES-U.S. 30-year bond yields fall to record low

Jonathan Oatis and Chris Reese)

* U.S. to sell $41 bln 5-year fixed-rate notes at 1 p.m.

* Inversion spreads across the U.S. yield curve

(Updates market action, adds quote) NEW YORK, Aug 28 (Reuters) - U.S. Treasury yields fell on Wednesday, with 30-year yields setting all-time lows, as fears about a recession and trade tensions between China and the United States stoked unrelenting demand for low-risk government debt. Inversion is spreading across the U.S. yield curve, where short-dated yields are running above long-dated ones, which has also unsettled investors. Yield curve inversion often precedes a recession. Investors added to their safe-haven holdings of Treasuries as UK Prime Minister Boris Johnson sought to limit parliament's opportunity to derail his Brexit plan by suspending the House of Commons for around a month, starting in mid-September.

"Curve flattening continues in the U.S. with the long bond on fire, clearly assisted by large block trades," NatWest Markets strategists wrote in a research note. Those big-size trades may have occurred in the London session, they noted. Secondary trading volume of U.S. Treasuries in Europe hit a 30-day high, according to MarketAxess/Trax. Treasury prices pared their gains as Wall Street erased initial losses. While some fund managers view Treasuries as expensive, they are hard pressed to make a case to sell them given the uncertain outcome of the trade developments between Beijing and Washington. "It's hard to see where the endgame is with the trade tensions," said James Barnes, director of fixed income at The Bryn Mawr Trust Co. in Devon, Pennsylvania. The Federal Reserve is also monitoring the trade tensions in its economic outlook. Interest rates futures implied traders fully expect the U.S. central bank to lower key borrowing costs by at least a quarter point at its Sept. 17-18 policy meeting, following up on its first rate cut since 2008. Meanwhile, the Treasury Department sold $18 billion in two-year floating-rate notes to solid demand. It will offer $41 billion in five-year fixed-rate debt at 1 p.m. (1700 GMT), part of this week's $113 billion of fixed-rate government note supply. At 11:41 a.m. (1541 GMT), the yields on 30-year government bonds were 1.937%, down 2.4 basis points from late on Tuesday. They hit an all-time low of 1.905% earlier Wednesday. The 30-year yield is below 3-month T-bill rates, which has not happened since 2007. As for the rest of the yield curve, the spread on three-month T-bill rates over 10-year yields widened to as much as 55 basis points, a level not seen since March 2007, while the premium on 2-year yields above 10-year yields increased to 6.5 basis points, according to Refinitiv and Tradeweb data. August 28 Wednesday 11:41AM New York / 1541 GMT Price

US T BONDS SEP9 166-31/32 15/3210YR TNotes SEP9 131-88/256 7/32Price Current NetYield % Change

(bps)

Three-month bills 1.955 1.9976 0.003Six-month bills 1.835 1.8779 -0.015Two-year note 100 1.5 -0.028Three-year note 100-60/256 1.4188 -0.024Five-year note 101-204/256 1.3711 -0.021Seven-year note 102-248/256 1.423 -0.02410-year note 101-120/256 1.466 -0.02430-year bond 107-40/256 1.9342 -0.033YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield -3.60 1.7030-year vs 5-year yield 56.30 -0.85

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap -1.00 1.50

spread

U.S. 3-year dollar swap -4.50 0.00

spread

U.S. 5-year dollar swap -6.75 -0.75

spread

U.S. 10-year dollar swap -10.25 -1.00

spread

U.S. 30-year dollar swap -40.50 -1.00

spread

(Additional reporting from Dhara Ranasinghe in London; editing