U.S. yields fall for 3rd day as economic, global uncertainty weighs

By Gertrude Chavez-Dreyfuss

NEW YORK, Oct 24 (Reuters) - U.S. Treasury yields fell for a third straight session on Thursday in choppy trading, as increasing economic, political, and global uncertainty spurred investors to seek safety in the bond market.

Issues surrounding Britain's exit from the European Union, the impeachment inquiry into U.S. President Donald Trump and mounting evidence of U.S. economic weakness have dampened Treasury yields.

Analysts noted that even the one bright spot, Washington's "phase 1" trade deal with Beijing on trade matters, has yet to be put in paper.

"We are sort of in a holding pattern in Treasury yields," said Ellis Phifer, market strategist, at Raymond James in Memphis, Tennessee, noting there are a lot of issues plaguing the market.

Data showed new orders for key U.S.-made capital goods fell more than expected in September and shipments declined, reflecting weak business investment during the trade war.

Orders for non-defense capital goods excluding aircraft, seen as a measure of business spending plans on equipment, fell 0.5% last month, exceeding the 0.2% decline forecast by economists polled by Reuters. The report showed slow demand for transportation equipment, motor vehicles and parts, computers and electronic products.

Sales of new U.S. single-family homes also fell in September even as prices notched the biggest monthly fall in five years.

"I think we are closer to recession than we have been. That has a lot to do with business confidence," Raymond James' Phifer said. "If businesses start pulling back, then we start getting closer to recession."

In morning trading, U.S. 10-year note yields US10YT=RR slid to 1.746% from 1.759% late on Wednesday.

Yields on 30-year bonds US30YT=RR fell to 2.233%, from 2.251% on Tuesday.

On the short-end of the curve, U.S. two-year yields were down at 1.563% US2YT=RR, from Wednesday's 1.582%.

Later on Thursday, the U.S. Treasury will sell $32 billion in seven-year notes and market participants expect strong demand particularly after two strong auctions of two-year and five-year notes this week.

"The strong sponsorship for both 2s and 5s does not suggest worry of a hawkish (Fed Chairman) Powell is sufficient to dissuade buying at these yield levels," said BMO Capital Markets in a research note.

"After all, we have seen a solid concession from the local yield lows even as rates have consolidated this week."

October 24 Thursday 10:44AM New York / 1444 GMT

Price

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

1.6275

1.6614

0.002

Six-month bills US6MT=RR

1.605

1.645

0.000

Two-year note US2YT=RR

99-223/256

1.5657

-0.016

Three-year note US3YT=RR

99-116/256

1.564

-0.016

Five-year note US5YT=RR

99-172/256

1.5685

-0.012

Seven-year note US7YT=RR

99-198/256

1.6597

-0.010

10-year note US10YT=RR

98-232/256

1.7467

-0.012

30-year bond US30YT=RR

100-88/256

2.2341

-0.017

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

3.00

-0.25

U.S. 3-year dollar swap spread

-1.00

0.00

U.S. 5-year dollar swap spread

-2.50

-0.25

U.S. 10-year dollar swap spread

-8.50

-0.50

U.S. 30-year dollar swap spread

-38.25

-0.25

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

((gertrude.chavez@thomsonreuters.com; 646-223-6322; Reuters Messaging: gertrude.chavez.reuters.com@reuters.net))

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