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TREASURIES-Yields fall on weak Chinese data, Afghanistan concerns

·3 min read

By Karen Brettell NEW YORK, Aug 16 (Reuters) - U.S. Treasury yields fell on Monday as weak Chinese economic data and concerns about the Taliban victory in Afghanistan dampened risk appetite and increased demand for the safe haven bonds. China's factory output and retail sales growth slowed sharply and missed expectations in July, as new COVID-19 outbreaks and floods disrupted business operations, adding to signs the economic recovery is losing momentum. Meanwhile five people were killed in chaos at Kabul airport on Monday, witnesses said, as people tried to flee a day after Taliban insurgents seized the Afghan capital and declared the war against foreign and local forces over. The developments in Afghanistan mean “chaos for 38 million situated between Pakistan and Iran (and) further destabilizes a world still giving ground to the pandemic,” Jim Vogel, an interest rate strategist at FHN Financial, said in a report. Concerns about the spread of new COVID variants is adding demand for U.S. bonds. Benchmark 10-year yields fell four basis points to 1.258%. The yield curve between two-year and 10-year notes flattened two basis points to 105 basis points. Investors are also focused on minutes from the Federal Reserve’s July meeting due on Wednesday, which will be scoured for any new insight into when the U.S. central bank is likely to begin paring bond purchases. Fed Chair Jerome Powell told reporters after the meeting that he wants to see “strong job numbers” in the coming months before tapering purchases. The Fed is seen as most likely to announce the change at its December meeting, though some analysts and investors have warned that it may happen sooner. Powell may also drop hints on when a taper is likely when he speaks at the Fed’s annual economic symposium at Jackson Hole, Wyoming, next week, though he is not expected to announce a policy change then. “It’s not an official policy meeting, it’s not something that has been really used to make announcements about policy changes in the past,” said Tom Simons, a money market economist at Jefferies in New York. The Treasury will sell $27 billion in 20-year bonds on Wednesday and $8 billion in 30-year Treasury Inflation-Protected Securities (TIPS) on Thursday. August 16 Monday 9:22AM New York / 1322 GMT Price Current Net Yield % Change (bps) Three-month bills 0.055 0.0558 0.003 Six-month bills 0.0475 0.0482 -0.003 Two-year note 99-216/256 0.2051 -0.010 Three-year note 99-224/256 0.417 -0.021 Five-year note 99-96/256 0.7538 -0.034 Seven-year note 99-192/256 1.0373 -0.040 10-year note 99-236/256 1.2583 -0.039 20-year bond 107-36/256 1.8179 -0.026 30-year bond 101-216/256 1.9189 -0.029 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 9.00 0.25 spread U.S. 3-year dollar swap 10.00 0.25 spread U.S. 5-year dollar swap 8.25 0.00 spread U.S. 10-year dollar swap 0.50 0.25 spread U.S. 30-year dollar swap -30.25 -0.25 spread (Editing by Mark Heinrich)