July 5, 2017 / 3:36 PM / in 23 days

CORRECTED-TREASURIES-Yields dip but still near recent peaks ahead of Fed minutes

5 Min Read

 (Corrects previous session to "Monday" instead of "Tuesday in
paragraphs 3 and 7)
    * Yields edge lower after weak U.S. factory orders data
    * U.S. 3-yr yields touch roughly 3-1/2-month high
    * Fed minutes to be released at 2 p.m. EDT
    * Traders expect Fed minutes to reinforce hawkish view

    By Sam Forgione
    NEW YORK, July 5 (Reuters) - Most U.S. Treasury yields edged
lower on Wednesday after weak U.S. factory orders data but
remained near multi-week or multi-month peaks as traders
anticipated minutes from the Federal Reserve's June meeting to
reinforce a recent hawkish shift in global central bank policy. 
    The Commerce Department said factory goods orders dropped
0.8 percent in May. Economists had forecast factory orders
falling 0.5 percent.
    U.S. 10-year Treasuries were last up 3/32 in price to yield
2.334 percent, from a yield of 2.346 percent late Monday. 
    Fed officials have signaled they still plan another interest
rate hike this year. Analysts said expectations are that the
minutes, to be released at 2 p.m. EDT (1800 GMT), will reinforce
that view. 
    Analysts said comments from the heads of the European
Central Bank and Bank of England last week indicate that global
central banks appear to be simultaneously leaning toward tighter
monetary policy. This view has driven the recent push higher in
yields.
    "The central banks all seem to be in agreement in kind of a
hawkish signaling," said John Herrmann, director of interest
rates strategy at MUFG Securities in New York. 
    In morning U.S. trading, benchmark 10-year yields
 hit their highest in more than seven weeks at 2.357
percent and three-year yields hit a roughly
3-1/2-month high of 1.598 percent. U.S. two-year yields
 were at 1.410 percent, near Monday's more than
eight-year peak of 1.426 percent. 
    Herrmann said the Fed minutes would likely indicate that the
central bank saw the recent weakness in inflation as driven by
transitory factors related to the oil, pharmaceutical and
telecommunications sectors. 
    Analysts also said Friday's U.S. non-farm payrolls report
could show a jump in jobs growth for the month of June, which
would also pressure yields higher.
    Economists polled by Reuters expect the report to show U.S.
employers added 179,000 jobs last month, compared to just
138,000 in May. 
    "People would lean towards a stronger rather than weaker
number," said John Briggs, head of strategy for the Americas at
NatWest Markets. "The bias is for strength for a May payback,”
he said in reference to the June report's potential strength
compensating for the weak showing in May. 
    
July 5 Wednesday 11:18AM New York / 1518 GMT
                               Price                  
 US T BONDS SEP7               153-8/32     0-6/32    
 10YR TNotes SEP7              125-60/256   0-32/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.03         1.047     -0.013
 Six-month bills               1.1275       1.1497    -0.002
 Two-year note                 99-176/256   1.4103    -0.008
 Three-year note               99-202/256   1.5735    -0.010
 Five-year note                99-50/256    1.9201    -0.010
 Seven-year note               98-224/256   2.1745    -0.014
 10-year note                  100-92/256   2.3338    -0.012
 30-year bond                  102-212/256  2.8584    -0.004
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        22.75       ******    
 spread                                               
 U.S. 3-year dollar swap        20.25       ******    
 spread                                               
 U.S. 5-year dollar swap         7.00       ******    
 spread                                               
 U.S. 10-year dollar swap       -2.25       ******    
 spread                                               
 U.S. 30-year dollar swap      -28.75       ******    
 spread                                               
 
 (Reporting by Sam Forgione; Editing by David Gregorio)
  

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