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TREASURIES-U.S. bond yields little changed as soft auction offsets FBI Comey's firing
May 10, 2017 / 7:26 PM / 7 months ago

TREASURIES-U.S. bond yields little changed as soft auction offsets FBI Comey's firing

    * Comey firing raises worries about Trump's economic agenda
    * Treasuries bids diminish after poor 10-year note sale
    * U.S. 10-year yield retests 5-week high
    * Fed's Rosengren sees possibly three more rate hikes in
2017

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, May 10 (Reuters) - U.S. Treasury yields were
little changed on Wednesday as a weak 10-year note auction
offset concerns about a political storm over U.S. President
Donald Trump's ouster of the FBI chief that could hinder his
plans for tax cuts and infrastructure spending. 
    U.S. bond yields fell overnight in reaction to Trump's
abrupt dismissal of FBI Director James Comey late Tuesday. It
drew a storm of criticism, mostly from Democrats, that the move
was aimed at blunting the agency's probe into the Trump
presidential campaign's possible collusion with Russia to sway
last year's election.
    The yield drop faded following below-average investor demand
at a $23 billion 10-year note sale with benchmark yields
retesting a five-week high reached on Tuesday.
    "It's all taken in stride at this point," Bill Northey,
chief investment officer at the private client group of U.S.
Bank in Helena, Montana, said of Comey's firing. "This is about
the Fed and inflation levels."
    Boston Fed President Eric Rosengren said on Wednesday the
central bank should raise rates three more times in 2017 and
start reducing its $4.5 trillion balance sheet.
    Interest rate futures implied traders saw an 83 percent
chance the Fed would raise its benchmark overnight rate by a
quarter of a percentage point to a range of 1.00 percent to 1.25
percent at its June 13-14 policy meeting, compared
with 88 percent on Tuesday, according to CME Group's FedWatch
program.
    Earlier Wednesday, the Labor Department said U.S. import
prices grew 0.5 percent in April, which was above forecast and
marked a fifth straight month of increases.    
    Competition from a growing pipeline of higher-yielding
corporate bonds also put upward pressure on Treasury yields.
Companies have raised more than $23 billion with
investment-grade bonds so far this week, according to IFR, a
Thomson Reuters unit.
    The benchmark 10-year Treasury yield touched
2.416 percent, a five-week high already struck on Tuesday. It
was last at 2.412 percent, up half a basis point on the day.
    The 30-year bond yield was flat at 3.040
percent, holding below 3.047 percent set on Tuesday, which was
its highest level since March 31.
    The Treasury Department will complete May's $62 billion
refunding with a $15 billion sale of 30-year bonds
 on Thursday following a cool reception to the
three-year and 10-year auctions.
    "The 30-year is a different kind of animal. There should be
good demand but some people may stay cautious because of its
duration," said Justin Lederer, Treasury strategist at Cantor
Fitzgerald in New York.
May 10 Wednesday 2:12PM New York / 1812 GMT
                               Price                  
 US T BONDS JUN7               150-20/32    -0-4/32   
 10YR TNotes JUN7              124-212/256  0         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.885        0.8993    -0.016
 Six-month bills               1.0175       1.037     0.003
 Two-year note                 99-204/256   1.3548    0.000
 Three-year note               99-206/256   1.5669    -0.003
 Five-year note                99-184/256   1.9346    0.000
 Seven-year note               98-152/256   2.2188    0.000
 10-year note                  98-160/256   2.4087    0.002
 30-year bond                  99-80/256    3.0351    -0.004
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        25.00        -2.00    
 spread                                               
 U.S. 3-year dollar swap        20.25        -3.50    
 spread                                               
 U.S. 5-year dollar swap         6.25        -1.75    
 spread                                               
 U.S. 10-year dollar swap       -8.75        -1.50    
 spread                                               
 U.S. 30-year dollar swap      -46.50        -1.25    
 spread                                               
 
    

    
 (Reporting by Richard Leong; Editing by Nick Zieminski and
Chizu Nomiyama)
  
 

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