US Markets

Yields hold just below three-month highs, trade deal in focus

Credit: REUTERS/JOSE LUIS GONZALEZ

U.S. Treasury yields held just below three-month highs on Friday as investors evaluated the likelihood that the United States and China would reach a deal to roll back tariffs, as officials made contradictory statements on the issue.

    * Contradictory statements on U.S., China tariff roll back
    * U.S. bond yields move higher in line with European debt
    * Consumer price data next week next major economic release

    By Karen Brettell
    NEW YORK, Nov 8 (Reuters) - U.S. Treasury yields held just
below three-month highs on Friday as investors evaluated the
likelihood that the United States and China would reach a deal
to roll back tariffs, as officials made contradictory statements
on the issue.
    China and the United States have agreed to roll back tariffs
on each others' goods in a "phase one" trade deal if it is
completed, officials from both sides said on Thursday, sparking
division among some advisers to President Donald Trump.
    The Chinese Commerce Ministry, without laying out a
timetable, said the two countries had agreed to cancel the
tariffs in phases.
    White House trade adviser Peter Navarro, however, said in an
interview with Fox Business Network: "There is no agreement at
this time to remove any of the existing tariffs as a condition
of the phase one deal." [nL3N27N228]
    “It’s still unclear; we don’t have a lot of clarity on
what’s actually going to happen,” said Tom di Galoma, a managing
director at Seaport Global Holdings in New York.
    Trade tariffs have been blamed for slowing global growth and
their removal would provide a considerable boost to risk
appetite.
    Benchmark 10-year note yields <US10YT=RR> rose as high as
1.973% on Thursday on optimism a deal would be reached, the
highest since Aug. 1. On Friday, the yields traded just below
this level at 1.933%.
    U.S. government bond yields are also moving in sympathy with
European government bonds, which have sold off on trade optimism
and on expectations that Britain will exit the European Union
after it holds an election in December.
    “The selling pressure is coming on the back of the
expectation that Brexit will happen one way or the other,” di
Galoma said.
    Buoyant stock markets have also reduced demand for bonds.
[.N]
    Investors are also watching economic data for further clues
on whether the Federal Reserve is likely to make further
interest rate cuts.
    The U.S. central bank cut rates last week for the third time
this year and indicated that additional rate decreases may be
unlikely in the near term.
    The next major U.S. economic release will be consumer price
data for October, which will be released on Wednesday. 

 (Reporting by Karen Brettell; editing by Jonathan Oatis)
 ((karen.brettell@thomsonreuters.com; 646-223-6274))
 
((-------MARKET SNAPSHOT AT 9:30 a.m. EDT (1430 GMT)-------
                                       Change vs    Current
                                          Nyk        yield
Three-month bills<US3MT=RR>  1.525       (+0.00)     1.556
Six-month bills  <US6MT=RR>  1.5375      (+0.00)     1.575
Two-year note <US2YT=RR>     99-22/32   (+01/32)     1.670
Five-year note <US5YT=RR>    98-28/32        (-)     1.741
10-year note  <US10YT=RR>    98-11/32   (-03/32)     1.933
30-year bond  <US30YT=RR>    99-09/32   (-06/32)     2.409
                                    
DOLLAR SWAP SPREADS
                                          LAST      Change
U.S. 2-year dollar swap spread             4.00     (+0.50)
U.S. 3-year dollar swap spread            -0.50     (-0.75)
U.S. 5-year dollar swap spread            -2.75     (-0.50)
U.S. 10-year dollar swap spread           -9.00     (-0.50)
U.S. 30-year dollar swap spread          -39.00     (-0.50)))

Keywords: USA BONDS/

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