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TREASURIES-Yields hit 3-week lows as Trump reflation trade wanes
February 7, 2017 / 7:47 PM / 8 months ago

TREASURIES-Yields hit 3-week lows as Trump reflation trade wanes

* Investors worry Trump’s pro-growth agenda could be derailed

* 10-year Treasury yields slip further below 50-day moving average

* Solid 3-year auction boosts buying (Updates to afternoon trading)

By Dion Rabouin

NEW YORK, Feb 7 (Reuters) - U.S. Treasury yields fell to their lowest in nearly three weeks on Tuesday, drifting past significant technical levels, as fixed-income investors worried that President Donald Trump’s pro-growth policies could be hamstrung by his focus on other issues.

Traders have worried that Trump’s promises to cut corporate taxes and boost infrastructure spending have yet to be fleshed out and could fade further into the background or face more significant resistance with time.

Trump’s nominee for Education Secretary, Betsy DeVos, was confirmed Tuesday in a contentious 50-50 vote by the U.S. Senate, largely along party lines, that Vice President Mike Pence had to break by voting in favor.

Benchmark 10-year note yields fell to 2.37 percent, their lowest since Jan. 18, with other Treasury yields falling broadly to their weakest levels since mid-January. Prices on the 10-year were last up 7/32 to yield 2.38 percent.

“The market is still giving the benefit of the doubt to the Trump administration, but the longer it takes for the market to see a real nexus on the policy front - those things that had expectations running high after the Republican sweep - the less convinced the market’s going to be that Trump is going to really deliver on those,” said Bruno Braizinha, interest rates strategist at Societe Generale.

Yields on the 10-year note fell below its 50-day moving average on Monday and continued to slip further past 2.40 percent on Tuesday. That added to the downward pressure, giving the markets a direction after a choppy early trading session, analysts said.

The yield on 2-year notes hit the lowest since Jan. 17. They were last little changed in price to yield 1.16 percent.

A solid 3-year note auction also helped increase buying, raising prices and pushing yields lower. The government sold $24 billion worth of 3-year notes at a high yield of 1.423 percent. The 3-year note was last yielding 1.413 percent. (Reporting by Dion Rabouin; Editing by Andrea Ricci and Diane Craft)

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