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TREASURIES-Prices advance on U.S., global uncertainty
April 27, 2017 / 7:39 PM / 7 months ago

TREASURIES-Prices advance on U.S., global uncertainty

 (Recasts, adds comments, results of 7-year auction, updates
    * U.S. 7-year note auction shows strong demand
    * Month-end buying helps lift Treasuries
    * Russia says North Korean crisis has worsened

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 27 (Reuters) - U.S. Treasury prices rose on
Thursday, as investors sought the safety of bonds in the face of
doubts about President Donald Trump's unimpressive tax plan and
persistent geopolitical tensions in North Korea and Syria.
    Bonds were also boosted by strong demand for the U.S.
Treasury's 7-year notes at Thursday's auction, as well as,
month-end buying by institutional investors to reflect expected
changes to portfolio benchmarks. 
    But at the center of the bond market's worry is Trump's tax
reform package that could get derailed once again.
    Trump on Wednesday unveiled a one-page plan proposing deep
tax cuts, many for businesses, that would make the federal
deficit balloon if enacted, far short of comprehensive reforms
both parties in Washington have sought for years.             
    "Trump is proposing massive tax cuts and there is no
indication that they would be revenue-neutral," said Marvin Loh,
senior fixed income strategist, at BNY Mellon in Boston.
    "Again, tax reform is all well and good, but that's like
aiming for world peace. How do you get it done?"
    In late trading, benchmark 10-year notes             were up
4/32 in price to yield 2.294 percent, down from 2.311 percent
late Wednesday.
    U.S. 30-year bond prices             rose 4/32, yielding
2.962 percent, lower than Wednesday's 2.97 percent.
    Russia's warnings that the North Korean situation has gotten
a lot worse also drove bids for Treasuries.             
    On the front end of the curve, U.S. two-year yields were at
1.257 percent           , down from Wednesday's 1.278 percent.
    A surprisingly robust U.S. 7-year note auction, showing
record high demand from indirect bidders, mainly foreign central
banks, underpinned Treasuries as well. Indirect bidders took
81.7 percent of the paper, well-above the takedown seen in March
of 71.1 percent and the 65.4 percent average.
    The yield was much lower than the expected level at the bid
deadline, with a strong bid-to-cover ratio of 2.73, higher than
the 2.56 last month, and the 2.53 average.             
    "The stats were off-the-charts strong," said Aaron Kohli,
rates strategist at BMO Capital Markets in New York.
    "The looming threat of a government shutdown helped to rob
the 7-year of any concession but also did provide a solid amount
of momentum for the belly," he added.
   Post-auction, U.S. 7-year notes were up 4/32 in price,
yielding 2.095 percent           , down from Wednesday's 2.115
    On Friday, investors await the first estimate of U.S. gross
domestic product for the first quarter, with a Reuters poll
showing a rise of 1.2 percent.  

 (Editing by James Dalgleish and Lisa Shumaker)

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