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TREASURIES-U.S. 30-year bonds 'on fire,' sends yields to record low

Jonathan Oatis)

(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 have stoked unrelenting demand for low-risk government debt. The inversion of the U.S. yield curve, where short-dated yields are running above long-dated ones, has also unsettled investors, as it 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 Brexit 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. Meanwhile, the Treasury Department will hold two auctions later Wednesday: $18 billion in two-year floating-rate notes at 11:30 a.m. (1530 GMT) and $41 billion in five-year fixed-rate debt at 1 p.m. (1700 GMT). At 9:07 a.m. (1307 GMT), the yields on 30-year government bonds were 1.916%, down 3.6 basis points from late on Tuesday. They hit an all-time low of 1.49% 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 55 basis points, a level not seen since March 2007, while the premium on 2-year yield above 10-year yield yields increased to 6.5 basis points, according to Refinitiv and Tradeweb data. August 28 Wednesday 9:10AM New York / 1310 GMT Price

US T BONDS SEP9 167-11/32 27/3210YR TNotes SEP9 131-100/256 8/32Price Current NetYield % Change

(bps)

Three-month bills 1.955 1.9976 0.003Six-month bills 1.84 1.8831 -0.010Two-year note 99-255/256 1.502 -0.026Three-year note 100-60/256 1.4188 -0.024Five-year note 101-208/256 1.3678 -0.024Seven-year note 103-4/256 1.416 -0.03110-year note 101-148/256 1.4542 -0.03630-year bond 107-156/256 1.915 -0.052YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield -4.90 0.4530-year vs 5-year yield 54.60 -2.40

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

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

spread

U.S. 3-year dollar swap -5.00 -0.50

spread

U.S. 5-year dollar swap -7.00 -1.00

spread

U.S. 10-year dollar swap -10.50 -1.25

spread

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

spread

(Additional reporting from Dhara Ranasinghe in London; editing