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TREASURIES-Yields rise with European debt after upbeat Draghi comments
June 27, 2017 / 1:33 PM / 5 months ago

TREASURIES-Yields rise with European debt after upbeat Draghi comments

    * ECB's Draghi takes upbeat view on economy
    * Fed's Yellen to speak on Tuesday
    * Five-year, 30-year yield curve flattest since 2007
    * Treasury to sell $34 bln in five-year notes

    By Karen Brettell
    NEW YORK, June 27 (Reuters) - U.S. Treasury yields rose on
Tuesday, in sympathy with European government debt weakness,
after European Central Bank President Mario Draghi fueled
expectations that the ECB is closer to announcing a reduction of
    Draghi indicated that the central bank might tweak its
stimulus so that it does not become more accommodative as the
economy recovers.             
    “He surprised the market with that upbeat stance,” said Tom
di Galoma, a managing director at Seaport Global in New York.
“The European government bond market didn’t take it very well.”
    Treasury yields rose in line with European bonds.
    Benchmark 10-year notes             were last down 13/32 in
price to yield 2.18 percent, up from 2.14 percent late on
    The Treasury yield curve continued to flatten, with the gap
between five-year notes and 30-year bonds               
dropping to a low of 92.70 basis points. That was the flattest
level since late 2007.
    The difference between yields on two-year and 10-year notes
               declined to 76.80 basis points, its lowest level
since Sept. 2.
    The yield curve has flattened in the past month as Federal
Reserve officials including New York Fed President William
Dudley indicated that further monetary policy tightening was
    That has led short- and intermediate-dated debt, which is
more sensitive to interest rate changes, to underperform, while
concerns about tepid growth and falling inflation have supported
long bonds.
    Longer-dated debt has also rallied as investors reach for
higher yields.
    Fund managers “are really defensive and believe that yields
could really ratchet lower, and they’re putting money into
duration,” said di Galoma.
    Fed chair Janet Yellen is due to speak later on Tuesday.
    San Francisco Federal Reserve President John Williams said
on Tuesday that central banks in the United States and other
advanced economies would find themselves stuck with slow growth
over the long term unless fiscal authorities do something
decisive to turn things around.             
    The Treasury will sell $34 billion in five-year notes on
Tuesday as part of $88 billion in sales of new coupon-bearing
supply this week.
    The government sold $26 billion in two-year notes to strong
demand on Monday.              It will sell $28 billion in
seven-year notes on Wednesday.

 (Editing by Lisa Von Ahn)

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