January 10, 2017 / 8:46 PM / 8 months ago

TREASURIES-U.S. yields steady after solid 3-year note sale

* U.S. $24 billion 3-year note sale fetches solid demand
    * Investors await possible details on Trump's policies
    * U.S. small business optimism hits 12-year peak

 (Updates market action, adds table)
    By Richard Leong
    NEW YORK, Jan 10 (Reuters) - U.S. Treasury yields held
steady on Tuesday as solid investor demand for $24 billion of
three-year government notes offset mild selling in bonds after
Wall Street stock prices pared early losses. 
    Bond yields have held in a tight range following last
Friday's jobs data that showed the U.S. labor market continued
to tighten and a tentative pickup in wage growth. 
    "It's a market that's trying to sell off but it's not
succeeding," said Aaron Kohli, interest rate strategist at BMO
Capital Markets in New York.
    The yield on benchmark 10-year Treasuries was
little changed at 2.381 percent as it bounced in a narrow 3
basis-point range.
    Two-year yields were flat at 1.194 percent, while
30-year yields nudged up 0.4 basis point to 2.972
percent.
    The U.S. Treasury Department sold the latest three-year debt
issue, part of this week's $56 billion in
longer-dated Treasury supply, at a yield of 1.472 percent, the
highest since April 2010.
    Indirect bidders including fund managers and foreign central
banks bought 54.6 percent of the three-year supply, their
biggest share since September. 
    "The strength of the indirect bid typically tends to trade
the strength of investment fund demand," John Canavan, market
strategist at Stone & McCarthy Research Associates, wrote in a
research note on the three-year auction. 
    The Treasury will sell $20 billion in 10-year notes
 on Wednesday and $12 billion in 30-year bonds
 on Thursday. 
    Investors' enthusiasm in Treasuries, which have retraced
some of its heavy losses in late 2016, was tempered by data on
Monday that showed U.S. small business optimism hit a 12-year
high in December and a pickup in job openings. 
 
    Possibility of steep tax cuts and infrastructure spending
under a Trump administration and a Republican-controlled
Congress has stoked worries about a surge in inflation and
federal borrowing, investors said.
    Investors awaited details about possible economic policies
from President-elect Donald Trump who was scheduled for a news
conference on Wednesday. 
    Anxiety whether Trump could deliver on economic issues he
pledged during his campaign has led to a pullback in stock
prices in recent days.
    In late Tuesday trading, Wall Street shares bounced back
from their initial lows with the Nasdaq hitting a record
intraday high, weighing on longer-dated Treasuries. 
    Treasuries demand has also been kept in check by this week's
corporate bond supply with companies seen issuing $25 billion to
$30 billion in the investment-grade sector, according to IFR, a
Thomson Reuters unit. 
January 10 Tuesday 3:22PM New York / 2022 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.5125       0.5203    0.000
 Six-month bills               0.5925       0.6025    0.002
 Two-year note                 100-28/256   1.1936    0.000
 Three-year note               99-200/256   1.4515    -0.002
 Five-year note                100-144/256  1.8809    0.000
 Seven-year note               100-108/256  2.1844    0.002
 10-year note                  96-172/256   2.3812    0.005
 30-year bond                  98-20/256    2.9725    0.005
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        28.00         0.00    
 spread                                               
 U.S. 3-year dollar swap        22.00         0.75    
 spread                                               
 U.S. 5-year dollar swap         4.00         0.25    
 spread                                               
 U.S. 10-year dollar swap      -13.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -49.25         0.50    
 spread                                               
 
    
     

 

 (Reporting by Richard Leong; Editing by Meredith Mazzilli and
Diane Craft)

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