Wires

TREASURIES-U.S. long yields slide as trade uncertainty persists

Gertrude Chavez-Dreyfuss

NEW YORK, Nov 19 (Reuters) - U.S. long-dated Treasury yields, which have fallen in five of the last six sessions, slipped again on Tuesday, with risk appetite weaker overall amid the persistent uncertainty over U.S.-China trade negotiations. U.S. 30-year yields fell to two-week lows, while those on 10-year notes hit a low of 1.795%, matching Monday's two-week trough. Bond investors are cautiously optimistic that a trade deal between the world's two largest economies will get done, but the delay after what has been a two-year trade war has kept market participants on the sidelines. "The long end is being driven by what is going on in China," said Stan Shipley, fixed income strategist at Evercore ISI in New York. "There is cautious optimism in the market. I think most investment managers are sitting here with returns of 20% in the U.S. stock market. The last thing they want to do is squander those returns, so they're being cautious," he added. Solid U.S. data showing that homebuilding rebounded in October and permits for future home construction jumped to a more than 12-year high had minimal impact on the Treasury market, with the focus on trade and other factors. Amid a trade standoff, the U.S. yield curve continued to flatten on Tuesday, with the spread between the two-year and 10-year note yields below 20 basis points, the narrowest in two weeks. The curve has flattened for five straight sessions. In morning trading, U.S. 10-year note yields fell to 1.798%, from 1.808% late on Monday. Yields on 30-year bonds also slid to two-week troughs of 2.27% and last changed hands at 2.274%, down from 2.293% Monday. On the short-end of the curve, however, U.S. two-year yields were higher at 1.606%, up from Monday's 1.592%. "The Fed has given some hints that they would like to pause. There were some pricing in that they could cut rates in December of January," said Evercore's Shipley. "I think you need to take that out - because a cut is unlikely now. That's why we're seeing the short-end yields higher," he added. New York Federal Reserve President John Williams on Tuesday affirmed the Fed's neutral stance on monetary policy after cutting interest rates three times this year. "I think we have monetary policy in the right place," he said during a discussion at a capital markets conference in Washington. "The economy is right where we would like it to be."

November 19 Tuesday 10:24AM New York / 1524 GMT

Price Current NetYield % Change

(bps)

Three-month bills 1.54 1.5719 -0.002Six-month bills 1.54 1.578 0.000Two-year note 99-206/256 1.6022 0.010Three-year note 100-18/256 1.6008 0.006Five-year note 99-100/256 1.6287 0.004Seven-year note 99-96/256 1.7208 -0.00510-year note 99-144/256 1.798 -0.01030-year bond 102-44/256 2.2747 -0.018

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 0.00 -0.75

spread

U.S. 3-year dollar swap -3.50 -0.50

spread

U.S. 5-year dollar swap -5.50 -0.25

spread

U.S. 10-year dollar swap -10.50 0.00

spread

U.S. 30-year dollar swap -39.75 0.50

spread

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)