* Long bonds rally, yield curve flattens
* Treasury evaluating ultra-long bonds
* Fed meeting in focus
By Karen Brettell
NEW YORK, May 3 U.S. 30-year bond yields fell
and the yield curve flattened on Wednesday after the Treasury
Department said it was studying the issuance of an ultra-long
bond, but did not commit to one.
The U.S. Treasury said on Wednesday it will keep coupon
auctions steady in the upcoming quarter and that it is studying
the possibility of issuing ultra long-term bonds.
That came after Treasury Secretary Steven Mnuchin said in an
interview with Bloomberg Television on Monday that his
department was looking into the issuance of bonds with
maturities beyond 30 years.
“I think a lot of people were expecting the Treasury to
commit to an ultra-long issue and they basically said that
they’re reviewing it but remaining non-committal,” said Gennadiy
Goldberg, interest rate strategist at TD Securities in New York.
Thirty-year bonds were last up 20/32 in price to
yield 2.95 percent, down from 2.99 percent earlier. Benchmark
10-year notes gained 2/32 in price to yield 2.29
percent, down from 2.30 percent on Tuesday.
The yield curve between 5-year notes and 30-year bonds
flattened to 113 basis points, from 117 basis
points earlier on Wednesday.
The Treasury also kept the size of its 10-year and 30-year
bond sales planned for next week unchanged, after some investors
had expected these issues would be increased.
The Treasury said it will sell $62 billion in coupon debt
next week, including $24 billion in 3-year notes, $23 billion in
10-year notes and $15 billion in 30-year bonds.
Investors were focused on the conclusion of the Federal
Reserve’s two-day meeting later on Wednesday for any new signals
on when the U.S. central bank is likely to raise interest rates.
The Fed was expected to keep rates steady this month after
hiking in March, but investors were waiting to see if it
addresses recent economic weakness and whether it indicates that
another increase is likely at its June meeting.
Friday’s U.S. employment report for April was the next major
Bonds showed little reaction to a report by payrolls
processor ADP showing that U.S. private employers added 177,000
jobs in April, slightly above economists' expectations.
(Editing by Meredith Mazzilli)