US Markets

U.S. bond yields rise on hopes on trade, soft auction

Credit: REUTERS/THOMAS WHITE

U.S. Treasury prices fell on Thursday with 10-year yields hitting five-week highs, following a report that suggests advisers to President Donald Trump were mulling an interim trade deal with China and soft demand at a 30-year bond auction.

By Gertrude Chavez-Dreyfuss and Richard Leong

NEW YORK, Sept 12 (Reuters) - U.S. Treasury prices fell on Thursday with 10-year yields hitting five-week highs, following a report that suggests advisers to President Donald Trump were mullingan interim trade deal with China and soft demand at a 30-year bond auction.

The bond market reversed earlier gains in step with its European counterpart, after the European Central Bank cut interest rates to a record low and said it would restart asset purchases to boost its slumping economy.

That move in Treasuries faded, however, after Bloomberg News reported that Trump administration officials have discussed offering a limited trade agreement to China that would delay and even roll back some U.S. tariffs for the first time in exchange for Chinese commitments on intellectual property and agricultural purchases.

"The headlines on trade are pro-growth," said Jon Hill, senior rates strategist at BMO Capital Markets in New York. "Trade is obviously hard to price and it could unwind with one tweet, but incrementally, this is a risk-on impulse."

However, a CNBC report, citing a senior White House official, said an interim deal was "absolutely not" on the table.

In midafternoon U.S. trading, U.S. benchmark 10-year note yields US10YT=RR were up 5.10 basis points at 1.7837% after hitting rose 1.801%, their highest level since Aug. 5.

Thirty-year bond yields US30YT=RR were 5.80 basis points higher at 2.2658%. They reached 2.28%, the highest since Aug. 12.

Longer-dated yields were also pressured by comments from U.S. Treasury Secretary Steven Mnuchin who said on Thursday the government is seriously considering issuing a 50-year bond next year.

Other Treasury yields rose toward or above their 50-day moving averages, a move seen as a technical sign of a possible further rise in yields.

U.S. yields hit their session peaks following somewhat weak demand for $16 billion of 30-year bonds, part of this week's $78 billion in coupon-bearing Treasury debt.

Earlier, U.S. yields fell in reaction to the ECB's cut its deposit rate to an all-time low of -0.5% from -0.4%. The bank said it will restart bond purchases of 20 billion euros a month from November. L5N2622PA

 

Germany's 10-year bond yield earlier tumbled DE10YT=RR, while 30-year debt fell almost 20 basis points at one point DE30YT=RR. Italian 10-year bond yields hit a record low of 0.782% IT10YT=RR. GVD/EUR

U.S. and European yields reversed their earlier drop, following reports the ECB President Mario Draghi faced pushback from representatives of Germany and France on the restart of QE. This raised concerns whether his successor, Christine Lagarde, would be limited in her policy choices in the future.

The earlier ECB action overshadowed a stronger-than-expected U.S. core inflation number, an annual gain of 2.4%, the largest in a year.

The inflation report, however, should not prevent the Federal Reserve from raising interest rates later this month.

 

September 12 Thursday 2:12PM EDT/ 1812 GMT

Price

US T BONDS DEC9

159-30/32

-1

10YR TNotes DEC9

129-136/256

-0-96/256

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

1.9175

1.9588

-0.003

Six-month bills US6MT=RR

1.85

1.8985

0.015

Two-year note US2YT=RR

99-147/256

1.7213

0.051

Three-year note US3YT=RR

99-134/256

1.6637

0.054

Five-year note US5YT=RR

98-36/256

1.6415

0.049

Seven-year note US7YT=RR

97-196/256

1.7167

0.044

10-year note US10YT=RR

98-148/256

1.7819

0.049

30-year bond US30YT=RR

99-180/256

2.2637

0.056

DOLLAR SWAP SPREADS

 

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

-1.50

0.00

U.S. 3-year dollar swap spread

-4.00

0.25

U.S. 5-year dollar swap spread

-6.75

0.25

U.S. 10-year dollar swap spread

-12.00

0.00

U.S. 30-year dollar swap spread

-42.50

-0.25

 

 

GRAPHIC-ECB statement changeshttps://tmsnrt.rs/2AfnM3H

GRAPHIC-U.S. Fed's next rate cut?https://tmsnrt.rs/2yqy9R4

GRAPHIC-U.S. Fed's next rate cut? interactivehttps://tmsnrt.rs/2yrEpbn

(Reporting by Gertrude Chavez-Dreyfuss, Richard Leong Editing by Raissa Kasolowsky and Chizu Nomiyama)

((richard.leong@thomsonreuters.com; +1 646 223 6313; Reuters Messaging: richard.leong.thomsonreuters.com@thomsonreuters.net; Twitter @RichardLeong2))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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