TREASURIES-Yields tumble as U.S.-China trade war ramps up

By Gertrude Chavez-Dreyfuss

NEW YORK, June 19 (Reuters) - U.S. Treasury yields fell on

Tuesday, as trade tensions between China and the United States

intensified after President Donald Trump threatened to impose a

10 percent tariff on $200 billion of Chinese goods and Beijing

warned it would retaliate.

U.S. 10-year and 30-year yields fell to three-week lows,

while those on two-year notes slid to two-week troughs.

Trump called his latest move retaliation for China's

decision to raise tariffs on $50 billion in U.S. goods, which

came after Trump announced similar tariffs on Chinese goods on

Friday.

"This trade war is driving the risk-off mode," said Gennadiy

Goldberg, interest rates strategist, at TD Securities in New (KOSDAQ: 160550.KQ - news)

York.

U.S. benchmark 10-year yields fell to a three-week low of

2.853 percent, from Monday's 2.926 percent. They

were last at 2.878 percent.

U.S. 30-year yields dropped to 2.991 percent, a

three-week low as well, compared with 3.055 percent on Monday,

and were last at 3.014 percent.

On the short end of the curve, U.S. two-year yields sank to

a two-week low of 2.496 percent, compared with 2.558

percent late on Monday. Two-year yields last traded at 2.524

percent.

The yield curve, meanwhile, continued to steepen on Tuesday,

at least with respect to the spread between U.S. 5-year notes

and 30-year bonds. That spread narrowed to 26.90 basis points

.

"A bull steepener is totally expected because a trade war is

said to cause stagflation, which could prevent the Federal

Reserve from further hiking rates," said TD's Goldberg.

June 19 Tuesday 9:04AM New York / 1304 GMT

Price

US T BONDS SEP8 144-10/32 0-24/32

10YR TNotes SEP8 119-240/256 0-88/256

Price Current Net

Yield % Change

(bps)

Three-month bills 1.9 1.9358 0.009

Six-month bills 2.075 2.1261 -0.003

Two-year note 99-244/256 2.5245 -0.034

Three-year note 99-248/256 2.6359 -0.038

Five-year note 99-252/256 2.7532 -0.046

Seven-year note 100-52/256 2.8424 -0.048

10-year note 99-244/256 2.8803 -0.046

30-year bond 102-40/256 3.015 -0.040

DOLLAR SWAP SPREADS

Last (bps) Net (LSE: 0LN0.L - news)

Change

(bps)

U.S. 2-year dollar swap 27.00 0.50

spread

U.S. 3-year dollar swap 23.00 0.25

spread

U.S. 5-year dollar swap 14.50 0.00

spread

U.S. 10-year dollar swap 6.50 0.00

spread

U.S. 30-year dollar swap -6.50 -0.25

spread

(Reporting by Gertrude Chavez-Dreyfuss

Editing by Frances Kerry)