May 23, 2017 / 3:52 PM / 2 months ago

TREASURIES-U.S. bond yields edge up ahead of 2-year auction

5 Min Read

    * U.K. suicide bombing underpins safe-haven bids for bonds
    * U.S. Treasury to sell $26 bln in 2-year note issue
    * Companies raised $20 bln in high-grade market Monday -IFR
    * U.S. yields briefly pare fall on upbeat euro zone data

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, May 23 (Reuters) - U.S. Treasury yields rose
modestly on Tuesday as some investors and dealers made room for
$26 billion of two-year notes, the first part of this week's $88
billion in coupon-bearing government bond supply.
    U.S. yields fell earlier on safe-haven bids stoked by a
deadly suicide bombing in Britain.
    The Treasuries market held in a tight trading range for a
second day in the absence of major news or data to alter
traders' expectations the Federal Reserve may raise interest
rates at its June 13-14 policy meeting, analysts said.
    "We are just chopping around sideway," said Blake Gwinn,
U.S. rates strategist with NatWest Markets in Stamford,
Connecticut. "There's not a lot of investor conviction."
    The benchmark 10-year Treasury yield was 2.269
percent, up over 1 basis point from late on Monday, while the
30-year yield was 1 basis point higher at 2.926
percent.
    They hit session lows overnight but held above near last
week's one-month lows in the aftermath of news that at least 22
people were killed and 59 injured in a suicide bombing at a
concert hall in the English city of Manchester late Monday
evening.
    Interest rates futures implied traders saw about a 79
percent chance of a rate increase at the Fed's policy meeting
next month, nearly unchanged from Monday, CME
Group's FedWatch showed.
    Earlier safe-haven bids faded a bit on selling in Treasuries
and Bunds after a private survey showed German
business confidence reached a record high in May and another
survey suggested a solid pace of business growth in the euro
zone this month.
    The fall in U.S. yields was limited by this week's corporate
bonds supply, analysts said.
    Companies raised $20 billion in the investment-grade bond
market on Monday, with another $15 billion seen hitting before a
three-day U.S. holiday weekend, according to IFR, a Thomson
Reuters unit.
    The U.S. bond market will close early at 2 p.m. (1800 GMT)
on Friday and will be shut on Monday for the Memorial Day
holiday.
    Some analysts raised caution about the demand for the
upcoming two-year Treasury issue as it seems expensive
considering the possibility of a rate increase next month.
    "It appears to be extremely rich," Gwinn said.
    In "when-issued" activity, traders expected the new two-year
issue to sell at a yield of 1.296 percent, which
would be the highest yield since September 2008, Tradeweb data
showed.
May 23 Tuesday 11:43AM New York / 1543 GMT
                               Price                  
 US T BONDS JUN7               153-21/32    -0-4/32   
 10YR TNotes JUN7              126          -0-32/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.915        0.9299    0.005
 Six-month bills               1.06         1.0805    0.013
 Two-year note                 99-230/256   1.3032    0.024
 Three-year note               100-18/256   1.4757    0.022
 Five-year note                100-74/256   1.8134    0.016
 Seven-year note               99-128/256   2.0777    0.016
 10-year note                  100-244/256  2.2677    0.014
 30-year bond                  101-120/256  2.926     0.011
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        23.25        -0.75    
 spread                                               
 U.S. 3-year dollar swap        20.00        -0.75    
 spread                                               
 U.S. 5-year dollar swap         7.00        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -6.50         0.00    
 spread                                               
 U.S. 30-year dollar swap      -46.25         0.50    
 spread                                               
 
    

    
 (Reporting by Richard Leong; Editing by Paul Simao)
  
 

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