TREASURIES-Yields decline on virus concerns and consumer data

By Ross Kerber

(Updates with market activity, analyst comment) By Ross Kerber BOSTON, Feb 14 (Reuters) - U.S. Treasury yields declined on Friday as investors bought safe-haven government debt ahead of a long holiday weekend after soft retail sales data and on continuing caution about the coronavirus epidemic in China. The benchmark 10-year yield was down 3.7 basis points in afternoon trading at 1.5797%. Analysts cited concerns about the coronavirus in China and a report that core U.S. retail sales were unchanged for January. An issue is the uncertain long-term economic impact of the epidemic, said Bill Merz, head of fixed income research at U.S. Bank Wealth Management. "The market has really been trading on sentiment lately. That’s understandable given the general uncertainty around coronavirus," he said. He added, "We don’t see any edge in trying to predict the outcome of something like that." Traders reduced risk in their portfolios heading into the weekend, wary of what news might emerge about the virus, similar to trading on previous Fridays. U.S. markets are closed on Monday for Presidents Day. "Traders are more comfortable going into the weekend" with less risk, said James Barnes, director of fixed income at Bryn Mawr Trust. He added that many believe "There's more risk to the downside than to the upside." U.S. Commerce Department data showed U.S. consumer spending appeared to have slowed further in January, with sales at clothing stores declining by the most since 2009, which could raise concerns about the economy's ability to continue its moderate expansion. Commerce said retail sales excluding automobiles, gasoline, building materials and food services were unchanged last month, weaker than the 0.3 percent rise economists had predicted in a Reuters poll. Data for December was revised down. Separately, U.S. industrial production fell 0.3% in January as unseasonably warm weather held down the output of utilities and Boeing Co cut production of civilian aircraft, the Federal Reserve said on Friday. In China, the capital city Beijing on Friday imposed a 14-day self-quarantine on people returning to the city from holidays to prevent the spread of the new coronavirus, as the country struggles to get its economy going after the annual Lunar New Year holiday. Authorities reported 5,090 new cases in mainland China, including more than 120 deaths, taking the number of infected to 63,851, and the number of deaths to 1,380. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 2 basis points at 1.4217% in afternoon trading. February 14 Friday 1:33PM New York / 1833 GMT Price Current Net Yield % Change (bps) Three-month bills 1.545 1.5766 -0.010 Six-month bills 1.515 1.5518 -0.008 Two-year note 99-233/256 1.4217 -0.020 Three-year note 99-246/256 1.3884 -0.030 Five-year note 99-218/256 1.4061 -0.034 Seven-year note 100 1.5 -0.038 10-year note 99-68/256 1.5797 -0.037 30-year bond 99-56/256 2.0349 -0.043 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 2.50 -0.50 spread U.S. 3-year dollar swap 1.25 -0.25 spread U.S. 5-year dollar swap -1.00 -0.75 spread U.S. 10-year dollar swap -6.00 -0.75 spread U.S. 30-year dollar swap -33.25 -0.50 spread (Reporting by Ross Kerber; Editing by David Gregorio)