TREASURIES-U.S. yields decline in thin trading ahead of Fed minutes

    (Updates prices, adds quote, details)
    By Davide Barbuscia
       NEW YORK, Nov 22 (Reuters) - U.S. Treasury yields eased
on Tuesday amid thin trading and lingering concerns over more
COVID-19 infections in China, with investors waiting for clues
on the outlook for inflation and monetary policy from the
Federal Reserve's minutes due on Wednesday.
    Benchmark 10-year Treasury yields went down
nearly 7 basis points to 3.759% while the yield on the two-year
note eased by a smaller extent to 4.518%. Bond yields
move inversely to prices.
    The yield curve that compares these two maturities
 remained deeply in negative territory at -76.1
basis points. When inverted, that part of the curve is seen as
an indicator of an upcoming recession.
    "There is little in terms of clear catalyst for the strength
in Treasuries this morning, though weakness in Chinese equities
following an increase in COVID cases may be a factor," said
Jonathan Cohn, head of rates trading strategy at Credit Suisse
in New York.
    Investors ditched risk assets on Monday on fears that China
could resume stricter measures to fight COVID after it said it
faces its most severe test of the pandemic, although global
shares rose on Tuesday on improved investor risk appetite.
    The bond market will be closed on Thursday for the
Thanksgiving holiday and will close early on Friday.
    "The confluence of a holiday week and World Cup is certainly
weighing on trading volume, which is well below average today.
Against this backdrop, the market may be potentially more
susceptible to otherwise minor drivers or flows," said Cohn.
    The Fed on Wednesday will release the minutes from its most
recent meeting, with investors looking for any sign of
discussions around moderating the pace of interest rate hikes as
the U.S. central bank seeks to fight decades-high inflation
without tightening monetary conditions to the point of pushing
the economy into a recession.
    Fed Chair Jerome Powell earlier this month said that while
borrowing costs will need to rise further the central bank may
raise rates in smaller increments in the future.
    "I think the market would want to confirm that, or maybe get
some indication of how unanimous that sentiment is," said Calvin
Norris, portfolio manager and U.S. rates strategist at Aegon
Asset Management.
    Fed funds futures' traders on Tuesday were pricing for the
central bank's benchmark policy rate to rise to a high of 5.079%
by June, up from expectations of about 4.9% earlier this month,
when data showed softer-than-expected consumer and producer
price pressures for October.
    The current federal funds rate stands at between 3.75% and
4.00%.
      November 22 Tuesday 3:00PM New York / 2000 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             4.2075       4.3123    -0.015
 Six-month bills               4.53         4.7       0.008
 Two-year note                 99-247/256   4.5186    -0.007
 Three-year note               100-160/256  4.2739    -0.034
 Five-year note                99-182/256   3.9393    -0.038
 Seven-year note               100-184/256  3.8805    -0.049
 10-year note                  103-4/256    3.7597    -0.067
 20-year bond                  99-48/256    4.0597    -0.079
 30-year bond                  103-4/256    3.8299    -0.077

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        29.25        -1.50
 spread
 U.S. 3-year dollar swap        11.75        -3.50
 spread
 U.S. 5-year dollar swap         6.00         0.00
 spread
 U.S. 10-year dollar swap       -3.75        -2.50
 spread
 U.S. 30-year dollar swap      -45.75        -2.00
 spread

 (Reporting by Davide Barbuscia; Editing by Tomasz Janowski and
Jonathan Oatis)