By Richard Leong
NEW YORK, May 25 U.S. Treasury yields fell on
Thursday ahead of a $28 billion sale of seven-year notes, the
final part of $88 billion worth of coupon-bearing government
supply this week.
The bond market held in a relative tight trading range as
there have been no major economic data to alter investors' views
on a growth rebound in the second quarter or signals from the
Federal Reserve that it would be more aggressive on removing
"We are not going to break out this range unless there is a
change on the outlook of the economy or the Fed is going to
change its policy tune," said Brian Rehling, co-head of global
fixed income strategy at Wells Fargo Investment Institute in St.
The benchmark 10-year Treasury yield was 2.254
percent, down 1 basis point from late on Wednesday. It has
bounced in a narrow 7 basis point range so far this week.
In "when-issued" activity, traders expected the new
seven-year note to sell at a yield of 2.070 percent
at 10:18 a.m. (1418 GMT), according to Tradeweb.
This compared with a 2.084 percent yield at the prior seven-year
auction in April.
Appetite for Treasuries was supported earlier this week by
safe-haven demand in reaction to Moody's downgrade of China and
the deadly suicide bombing in Manchester, England.
Fed minutes on its May 2-3 policy meeting, released on
Wednesday, buttressed the notion it has adopted a gradual
approach to shrinking its $4.5 trillion balance sheet even as it
is expected to further raise short-term interest rates.
Analysts said the U.S. central bank's cautious stance
stemmed from anemic first-quarter economic growth and mixed data
on business and consumer activity in the current quarter.
"Overall we would not be surprised by a strong (seven-year)
auction after yesterday's dovish minutes and month-end
extensions," Cantor Fitzgerald's Treasury strategist Justin
Lederer wrote in a research note.
These supportive factors for Treasuries were mitigated by
this week's hefty federal and corporate bond supply ahead of a
three-day U.S. holiday weekend, analysts said.
Companies have sold nearly $36 billion since Monday although
issuance slowed on Thursday, according to IFR, a Thomson Reuters
The U.S. bond market will close early at 2 p.m. (1800 GMT)
on Friday and will be shut on Monday for the U.S. Memorial Day
May 25 Thursday 10:23AM New York / 1423 GMT
US T BONDS JUN7 153-21/32 0-4/32
10YR TNotes JUN7 126-36/256 0-20/256
Price Current Net
Yield % Change
Three-month bills 0.9125 0.9273 -0.003
Six-month bills 1.05 1.0703 0.000
Two-year note 99-234/256 1.2936 -0.012
Three-year note 100-32/256 1.4568 -0.011
Five-year note 99-206/256 1.791 -0.011
Seven-year note 99-152/256 2.0631 -0.007
10-year note 101-8/256 2.2589 -0.007
30-year bond 101-84/256 2.9331 -0.002
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 23.75 0.75
U.S. 3-year dollar swap 21.00 1.25
U.S. 5-year dollar swap 8.25 0.75
U.S. 10-year dollar swap -5.50 0.50
U.S. 30-year dollar swap -44.25 0.50
(Reporting by Richard Leong; Editing by Meredith Mazzilli)