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U.S. yields tumble after whistleblower complaint on Trump

Credit: REUTERS/BEAWIHARTA

U.S. Treasury yields dropped on Thursday as political risks escalated after a congressional panel released a whistleblower complaint that accused President Donald Trump of pressing a foreign government to investigate a potential rival at next year's presidential election.

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 26 (Reuters) - U.S. Treasury yields dropped on Thursday as political risks escalated after a congressional panel released a whistleblower complaint that accused President Donald Trump of pressing a foreign government to investigate a potential rival at next year's presidential election.

Yields on long-dated U.S. debt fell to session lows following the release of the complaint. Overall, 10-year and 30-year yields declined in eight of the last nine sessions.

The complaint showed Trump pressed Ukrainian President Volodymyr Zelenskiy to investigate former Vice President Joe Biden to advance Trump's personal interest, according to the House Intelligence Committee.

Saying that more than six White House officials had made contact about Trump's communication with Ukraine, the report cited concerns that efforts to put pressure on Ukraine "pose risks to U.S. national security," undermining efforts "to deter and counter foreign interference in U.S. elections."

Earlier this week, U.S. House of Representatives Speaker Nancy Pelosi said the Democratic-led House was moving forward with an official impeachment inquiry against Trump, saying no one was above the law. The Ukraine issue is at the heart of the impeachment probe.

"We had anticipated this (impeachment talk) a year ago when we had the mid-term elections and the House was led by Democrats," said John Herrmann, rates strategist, at MUFG Securities Americas in New York.

"We knew that impeachment is the ultimate goal of the House's committee heads and so now we're moving along that path. We thought that would be, on the margin, disruptive to the economy and disruptive to risk-taking," he added.

According to a summary of a telephone call released by the Trump administration on Wednesday, Trump pressed Ukraine's leader to investigate Democratic presidential front-runner Joe Biden, in coordination with the U.S. attorney general and Trump's personal lawyer.

In afternoon trading, U.S. 10-year note yields US10YT=RR fell to 1.688% from 1.732% late on Wednesday.

Yields on 30-year bonds US30YT=RR were also lower at 2.134%, from 2.1835 on Wednesday.

U.S. two-year yields were down at 1.653% US2YT=RR, from Wednesday's 1.683%.

The whistleblower complaint overshadowed U.S. economic reports that were largely in line with expectations, although some of the details were on the weak side.

Gross domestic product increased at an unrevised 2.0% rate in the second quarter, expanding 2.6% in the first half. U.S. business investment though contracted more sharply than previously estimated in the second quarter while corporate profit growth was tepid.

Also on Thursday, the Treasury's seven-year note auction was solid overall, with a high yield lower than the expected yield at the bid deadline, suggesting healthy demand.

There were nearly $79.8 billion in bids for a 2.49 bid-to-cover ratio, much higher than the 2.16 cover last month, which was the lowest since March 2009, but only slightly better than the 2.43 average.

September 26 Thursday 1:22PM New York / 1722 GMT

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

1.8

1.8383

-0.057

Six-month bills US6MT=RR

1.8275

1.8752

-0.031

Two-year note US2YT=RR

99-184/256

1.6435

-0.039

Three-year note US3YT=RR

99-198/256

1.5784

-0.041

Five-year note US5YT=RR

99-174/256

1.5669

-0.047

Seven-year note US7YT=RR

98-94/256

1.6252

-0.042

10-year note US10YT=RR

99-120/256

1.6835

-0.048

30-year bond US30YT=RR

102-168/256

2.1293

-0.054

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

-1.00

0.75

U.S. 3-year dollar swap spread

-3.25

0.75

U.S. 5-year dollar swap spread

-7.25

0.00

U.S. 10-year dollar swap spread

-12.75

0.50

U.S. 30-year dollar swap spread

-43.00

1.00

(Reporting by Gertrude Chavez-Dreyfuss Editing by Peter Graff and Nick Zieminski)

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

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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