May 26, 2017 / 3:26 PM / 3 months ago

TREASURIES-U.S. bond yields slip on month-end buying

    * U.S. 2-, 10-year part of yield curve flattest in 7 months
    * U.S. bond market to close early at 2 p.m. (1800 GMT)

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, May 26 (Reuters) - U.S. Treasury yields fell on
Friday as investors bought bonds to rebalance their portfolios
at month-end, overriding an upward revision to first-quarter
gross domestic product and a smaller-than-forecast drop in
durable goods orders for April.
    The S&P 500 and Nasdaq held near their record
closing highs set on Thursday, stoking some safe-haven demand
for U.S. government debt in an abbreviated trading session,
analysts said.
    The U.S. bond market will close early at 2 p.m. (1800 GMT)
and will be shut on Monday for the U.S. Memorial Day holiday.
     "People are squaring up before the long weekend," said
Kathy Jones, chief fixed income strategist at Schwab Center for
Financial Research in New York. "We are chopping around at the
low end of the recent trading range." 
    At 11:16 a.m. (1516 GMT), the benchmark 10-year Treasury
note's yield was down less than 1 basis point at
2.248 percent on light trading volume. It traded in a tight
seven-basis-point range this week.
    The drop in the 10-year yield narrowed its gap with the
two-year yield to a shade less than 94 basis points,
the tightest in seven months, Tradeweb data
showed.
    This flattening of the yield curve suggested traders had
dialed back their outlook for U.S. growth and inflation to
levels prior to Donald Trump's presidential win. Trump and
leading Republican lawmakers have not delivered tax cuts, a
healthcare overhaul and infrastructure spending, which would
bolster business investments and consumer spending.
    Still Friday's data signaled the U.S. economy was expanding,
albeit at a modest clip. This may allow the Federal Reserve to
raise interest rates further and to begin paring its $4.5
trillion balance sheet.
    Gross domestic product grew at a 1.2 percent annual rate in
the first quarter, faster than the 0.7 percent pace reported
last month, the Commerce Department said in its second estimate.
    The agency also said durable goods orders fell 0.8 percent
in April, compared with a revised 2.3 percent gain in March and
a 1.2 percent decline forecast among analysts polled by Reuters.

    May 26 Friday 10:58AM New York / 1458 GMT
                               Price                  
 US T BONDS JUN7               154-1/32     0-6/32    
 10YR TNotes JUN7              126-64/256   0-20/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.9175       0.9323    0.000
 Six-month bills               1.0525       1.0727    -0.002
 Two-year note                 99-232/256   1.2976    0.000
 Three-year note               100-34/256   1.4539    -0.003
 Five-year note                99-214/256   1.7845    -0.005
 Seven-year note               99-164/256   2.0554    -0.012
 10-year note                  101-48/256   2.2412    -0.014
 30-year bond                  101-224/256  2.9058    -0.015
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        23.50        -0.25    
 spread                                               
 S U.S. 3-year dollar swap      21.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap         8.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -5.00         0.50    
 spread                                               
 U.S. 30-year dollar swap      -43.75         0.50    
 spread                                               
 
    

    
 (Editing by Bernadette Baum and Lisa Von Ahn)
  
 

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