May 23, 2017 / 8:22 PM / 3 months ago

TREASURIES-U.S. bond yields rise on supply, stock gains

    * Wall Street stock prices reduce demand for Treasuries
    * Latest U.S. 2-year note sale fetches most bids in a year
    * Safety bids tied to UK suicide bombing limit yield rise
    * FOMC minutes, $34 bln 5-year note auction on tap

 (Updates throughout, adds quote)
    By Richard Leong
    NEW YORK, May 23 (Reuters) - U.S. Treasury yields rose on
Tuesday as some investors pared their bond positions to make
room for this week's federal and corporate supply while others
reduced their safe-haven bond  holdings in favor of stocks. 
    Some traders also turned cautious ahead of the release of
the Federal Reserve's minutes of its May 2-3 meeting at 2 p.m.
(1800 GMT) on Wednesday. They may contain clues on the timing of
the next rate increase and a possible plan for slowing the
central bank's bond reinvestments, analysts said.
    Wall Street stock prices rebounded further on Tuesday from
last week's lows as investors seemed relieved that U.S.
President Donald Trump's budget plan contained no big surprises.

    Last Wednesday, stocks tumbled and bonds rallied with yields
falling to near one-month lows as news reports raised worries
about whether the widening probe into the Trump campaign's
possible ties with Russia in 2016 would hurt the chances of the
passage of tax cuts and other fiscal stimulus.
    Those fears have abated since even as more stories that cast
a cloud over Trump's presidency have emerged, analysts said.
    "As the perception of risk has faded, we are starting to
revert to the mean," said Bruno Braizinha, interest rate
strategist at SG Corporate & Investment Banking in New York.
    The benchmark 10-year Treasury yield was 2.287
percent, up three basis points from late on Monday, while the
30-year yield was more than three basis points
higher at 2.949 percent.
    U.S. yields reversed their earlier drop because of
safe-haven bids stoked by a suicide bombing that killed at least
22 people and injured 59 at a concert hall in the English city
of Manchester Monday evening.
    A solid $26 billion of a two-year note auction, the first
part of this week's $88 billion in coupon-bearing government
bond supply, failed to rekindle bids for Treasuries on the
secondary market. The latest two-year sale fetched the strongest
bidding in a year.
    The U.S. Treasury Department will sell $34 billion in
five-year notes on Wednesday. 
    Investors and dealers were also contending with substantial 
corporate supply. Companies were expected to issue up to $35
billion in high-grade bonds this week 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. 
    
May 23 Tuesday 3:51PM New York / 1951 GMT
                               Price                  
 US T BONDS JUN7               153-7/32     -0-18/32  
 10YR TNotes JUN7              125-228/256  -0-60/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.92         0.935     0.010
 Six-month bills               1.055        1.0754    0.007
 Two-year note                 99-228/256   1.3073    0.028
 Three-year note               100-10/256   1.4865    0.033
 Five-year note                100-56/256   1.8283    0.031
 Seven-year note               99-100/256   2.0948    0.033
 10-year note                  100-204/256  2.2852    0.031
 30-year bond                  101-4/256    2.9487    0.034
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        23.50        -0.50    
 spread                                               
 U.S. 3-year dollar swap        19.75        -1.00    
 spread                                               
 U.S. 5-year dollar swap         6.75        -0.75    
 spread                                               
 U.S. 10-year dollar swap       -6.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -45.75         1.00    
 spread                                               
 
       

    
 (Reporting by Richard Leong; Editing by Paul Simao and Steve
Orlofsky)
  
 

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