(Updates prices, adds details on Bank of Japan)
* U.S. 5-to-30-yr yield curve retreats from steepest since
* BOJ seen more likely to make surprise policy move than Fed
* Japanese financial markets closed for holiday
By Richard Leong
NEW YORK, Sept 19 U.S. Treasuries yields fell on
Monday as traders booked profits made on curve-steepening bets
ahead of monetary policy meetings this week at the Bank of Japan
and the U.S. Federal Reserve.
Trading volume was light amid a market holiday in Japan and
a dearth of U.S. economic data.
"It's profit-taking from the recent steepening trades ahead
of the central bank meetings on Wednesday," said Larry Milstein,
head of government and agency trading at R.W. Pressprich & Co.
in New York.
Traders reduced their positions on longer-dated global bond
yields rising faster than short-dated yields following the
European Central Bank's decision on Sept. 8 to refrain from
extending its bond purchase program worth more than one trillion
euros beyond March 2017 for now.
The ECB move raised speculation major central banks would no
longer pursue more quantitative easing and other unconventional
policies to drive down long-term borrowing costs and stimulate
Some traders anticipate the BOJ might embark on a move to
lower its target interest rate deeper into negative territory,
and reduce its bond purchases to hold down long-dated yields
"There's more of a potential surprise from the BOJ. The Fed
is not going to do much," Milstein said.
Meanwhile, analysts widely expect the Fed to hold short-term
interest rates at the current 0.25-0.50 percent target range but
to leave the way open for a rate increase at the end of the
Traders, however, remain skeptical of policy changes from
either central bank on Wednesday.
Interest rates market implied traders saw a 17 percent
chance the BOJ would cut its target rate to -0.30 percent from
-0.10 percent on Wednesday, while they priced in a 20.5 percent
probability the Fed would raise rates, Reuters data showed.
Separately, there was scant safehaven buying related to an
explosion that injured 29 people in New York City on Saturday,
traders and analysts said.
In early trading, benchmark 10-year Treasury notes were up
1/32 in price for a yield of 1.696 percent, down 0.5 basis point
from late on Friday.
The yield gap between five-year and 30-year Treasuries
contracted to 124 basis points after reaching 130 basis points
last Thursday, which was its widest level since June 27,
according to Tradeweb.
September 19 Monday 9:35AM New York / 1335 GMT
US T BONDS DEC6 165-23/32 0-2/32
10YR TNotes DEC6 130-116/256 0-12/256
Price Current Net
Yield % Change
Three-month bills 0.265 0.2689 -0.020
Six-month bills 0.4825 0.4904 -0.003
Two-year note 99-248/256 0.7662 -0.012
Three-year note 99-232/256 0.9069 -0.008
Five-year note 99-164/256 1.2 -0.010
Seven-year note 99-44/256 1.501 -0.009
10-year note 98-64/256 1.6926 -0.008
30-year bond 95-244/256 2.4414 -0.010
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 25.25 0.00
U.S. 3-year dollar swap 17.75 -0.25
U.S. 5-year dollar swap 1.50 0.25
U.S. 10-year dollar swap -17.25 0.00
U.S. 30-year dollar swap -56.25 0.25
(Reporting by Richard Leong; Editing by Bernadette Baum)