May 22, 2017 / 3:05 PM / 2 months ago

TREASURIES-U.S. yields steady as supply offsets political concerns

5 Min Read

 (Updates market action, adds quote)
    * U.S. Treasury to sell $88 bln in coupon-bearing debt
    * Concerns about stimulus delay support bids for bonds
    * Corporate bond supply seen heavy before holiday weekend

    By Richard Leong
    NEW YORK, May 22 (Reuters) - U.S. Treasury yields were
little changed on Monday as selling tied to this week's
government and corporate bond supply offset safe-haven bids
underpinned by worries about probes into U.S. President Donald
Trump's 2016 campaign.
    The U.S. Treasury Department planned to sell a combined sum
of $88 billion in two-year, five-year and seven-year debt ahead
of the Memorial Day holiday weekend.
    The U.S. bond market is scheduled to close early at 2 p.m.
(1800 GMT) on Friday and will be shut on Monday.
    Corporations were also tapping investors for cash before the
three-day weekend. They announced seven investment-grade deals
and seven junk bond offerings on Monday, according to IFR, a
Thomson Reuters unit.
    Traders will also watch for clues from Federal Reserve
officials this week on whether the U.S. central bank may raise
interest rates at its June 13-14 policy meeting.
    "This week, we do have supply and a stepped-up calendar in
speeches from Fed officials," said Mike Lorizio, head of
Treasuries trading at Manulife Asset Management in Boston.
    As some investors reduced their bond holdings to make room
for the new supply, there were signs speculators increased
stakes for bond yields to fall in the wake of reports on a
widening investigation into Trump's presidential campaign and
whether it colluded with Russia last year.
    Last Wednesday, the S&P 500 and the Dow suffered their
steepest one-day drops since September following reports that
Trump tried to interfere with a federal investigation of his
campaign. Investors fled into safe-haven Treasuries, pushing
benchmark yields to one-month lows as they trimmed stock
holdings.
    More news accounts alleging possible coordination between
Trump's campaign officials and Russia have emerged. 

    "The headlines are not going to go away and ... the
administration's push with its economic agenda seems to be
seriously compromised," Lorizio said.
    Early Monday, anxiety about Trump and Republican lawmakers'
ability to deliver on promised tax cuts, looser regulations and
infrastructure spending was limited by higher oil prices and
stronger defense stocks.
    This led to less buying of Treasuries than last week.
    The benchmark 10-year Treasury yield was 2.243
percent, little changed from late on Friday, while the 30-year
yield was 2.907 percent, flat from Friday.
    Last Thursday, the 10-year yield hit a one-month low at
2.180 percent, while the 30-year yield fell to 2.874 percent,
the lowest level since April 21, Reuters data showed.
May 22 Monday 10:51AM New York / 1451 GMT
                               Price                  
 US T BONDS JUN7               153-30/32    0-3/32    
 10YR TNotes JUN7              126-56/256   0-8/256   
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.9075       0.9221    0.008
 Six-month bills               1.02         1.0394    0.015
 Two-year note                 99-240/256   1.2826    0.004
 Three-year note               100-38/256   1.4489    -0.003
 Five-year note                100-110/256  1.7836    -0.003
 Seven-year note               99-172/256   2.0509    -0.002
 10-year note                  101-44/256   2.2432    -0.002
 30-year bond                  101-212/256  2.9082    0.002
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        23.75         0.25    
 spread                                               
 U.S. 3-year dollar swap        20.75         1.00    
 spread                                               
 U.S. 5-year dollar swap         7.25         0.00    
 spread                                               
 U.S. 10-year dollar swap       -6.50         0.00    
 spread                                               
 U.S. 30-year dollar swap      -46.75        -0.25    
 spread                                               
 
    

    
 (Reporting by Richard Leong; Editing by Paul Simao)
  
 

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