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TREASURIES-U.S. bond yields rise ahead of supply
May 8, 2017 / 2:52 PM / 7 months ago

TREASURIES-U.S. bond yields rise ahead of supply

    * U.S. to sell $62 billion in bonds at quarterly refunding
    * Macron's French presidential win pares bonds' safe-haven
    * Fed's Bullard sees little need for Fed to hike rates
    * Fed's Mester sees need for more rate increases as economy

    By Richard Leong
    NEW YORK, May 8 (Reuters) - U.S. Treasury yields rose on
Monday in advance of $62 billion in bond supply at this week's
quarterly refunding and following centrist Emmanuel Macron's
victory in the French presidential run-off on Sunday.
    Macron's win revived appetite for stocks, propelling the S&P
500 and Nasdaq to record highs, and reduced safe-haven demand
for bonds. Some traders heading into Sunday's vote had feared a
possible upset by his anti-European Union rival Marine Le Pen.
    With the closely watched French election in the rear view,
this week's domestic data and demand at the quarterly refunding
will determine the near-term direction on bond yields, analysts
    "It's a fairly heavy week with data and supply," said Ellis
Phifer, senior market strategist at Raymond James at Memphis,
    The week's key reports will be those on producer and
consumer prices as well as retail sales later this week,
analysts said.
    The Treasury Department will kick off its latest refunding,
where it will repay $49.7 billion to investors on maturing
bonds, on Tuesday with a $24 billion sale of three-year notes
    It will sell $23 billion in 10-year Treasuries
 on Wednesday and $15 billion in 30-year bonds
 on Thursday.
    In early Monday trading, the benchmark 10-year note yield
 was up more than 2 basis points at 2.378 percent but
short of the near four-week high set on Friday following a solid
U.S. payrolls report for April.
    The yield on 30-year bonds was more than 2 basis
points higher at 3.016 percent, while the two-year yield
 was up 1.6 basis points at 1.334 percent.
    Possible demand for this week's Treasury supply was based
partly on investors' perception on further rate increases from
the Federal Reserve, analysts said.
    Interest rate futures implied traders saw an 88 percent
chance the central bank would raise rates by a quarter point to
1.00-1.25 percent at its June 13-14 policy meeting, up
from 79 percent late on Friday, CME Group's FedWatch program
    Earlier on Monday, St. Louis Fed President James Bullard
said strong bond demand and sluggish workforce growth would keep
a lid on rates in the forseeable future, which would allow the
Fed to keep rates at current levels.
    At a separate event, Cleveland Fed chief Loretta Mester said
further rate increases are warranted as the economy has reached
the Fed's employment goal and is closing in on its 2 percent
inflation target.
May 8 Monday 10:39AM New York / 1439 GMT
 US T BONDS JUN7               151-6/32     -0-20/32  
 10YR TNotes JUN7              125-16/256   -0-40/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.8925       0.9068    0.015
 Six-month bills               1.0025       1.0215    0.005
 Two-year note                 99-214/256   1.3344    0.016
 Three-year note               99-234/256   1.5299    0.022
 Five-year note                99-222/256   1.9031    0.020
 Seven-year note               98-204/256   2.1869    0.022
 10-year note                  98-228/256   2.3777    0.026
 30-year bond                  99-176/256   3.0158    0.027
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        28.50        -0.75    
 U.S. 3-year dollar swap        24.75        -1.25    
 U.S. 5-year dollar swap         9.25         0.00    
 U.S. 10-year dollar swap       -6.25         0.00    
 U.S. 30-year dollar swap      -45.25         0.25    

 (Reporting by Richard Leong; Editing by Meredith Mazzilli)

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