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TREASURIES-U.S. yields advance as risk sentiment improves

Gertrude Chavez-Dreyfuss

NEW YORK, Sept 9 (Reuters) - U.S. Treasury yields rose broadly on Monday, with those on 10-year notes climbing to three-week peaks, as risk appetite improved on expectations that global central banks will launch stimulus measures to support their slumping economies. U.S. yields overall were higher in two of the last three sessions as investors grew less nervous about the U.S.-China trade war. Washington and Beijing have agreed to go back to the negotiating table. Treasuries are also moving in sympathy with the European bond market. "It does feel a that sentiment globally is firmer. The market is expecting some easing from the ECB at its meeting this week and there has also been a de-escalation of trade tensions," said Gennadiy Goldberg, senior rates strategist, at TD Securities in New York. "An ECB easing should weigh on yields, but a lot of times...you typically would see the market de-risking. If the expectation is that a quantitative easing program will actually improve the economy, you should see yields actually move higher," he added. The European Central Bank meets on Thursday. Money markets show investors expect a 10 basis-point cut in the deposit rate to -0.50% in the first cut since 2016. Some investors are betting on a bigger 20 basis-point easing; nearly a quarter of economists polled by Reuters anticipate this too. On Friday, China's central bank cut reserve requirements for a seventh time since early 2018 to free funds for lending

Federal Reserve Board Chairman Jerome Powell said on Friday the U.S. central bank would continue to "act as appropriate" to sustain U.S. expansion. In morning trading, U.S. benchmark 10-year Treasury note yields rose to 1.618% from 1.55% late on Friday. Early in the session, the 10-year yields hit a three-week high of 1.62%. Since the beginning of the year, 10-year yields have fallen more than 100 basis points. Yields on 30-year bonds advanced to 2.096% from 2.022% on Friday, up from record lows of 1.905% touched in late August. At the short end of the curve, U.S. two-year yields rose to 1.576% from Friday's 1.528%. "Thursday last week was a bit of a pivotal moment," TD's Goldberg said. "You saw a flash higher in rates on the positive U.S.-China trade news, and also the strong manufacturing report from the ISM (Institute for Supply Management). That was certainly a bit of a turning point, at least in the short term."

September 9 Monday 9:54AM New York / 1354 GMT

Price Current NetYield % Change

(bps)

Three-month bills 1.935 1.971 0.007Six-month bills 1.835 1.8826 0.011Two-year note 99-219/256 1.5746 0.047Three-year note 99-244/256 1.5163 0.052Five-year note 98-232/256 1.4789 0.059Seven-year note 98-204/256 1.5577 0.06010-year note 100-16/256 1.6181 0.06830-year bond 103-112/256 2.0948 0.073

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap -0.75 0.75

spread

U.S. 3-year dollar swap -5.00 0.75

spread

U.S. 5-year dollar swap -6.75 0.50

spread

U.S. 10-year dollar swap -11.25 0.75

spread

U.S. 30-year dollar swap -41.25 1.00

spread

(Reporting by Gertrude Chavez-Dreyfuss; Editing by David Gregorio)