March 7, 2017 / 4:32 PM / in 9 months

TREASURIES-U.S. bond yields rise ahead of 3-year note sale

    * U.S. to sell $24 billion in three-year debt at 1 p.m.
    * Yields underpinned by bets on Fed rate hike next week

    By Richard Leong
    NEW YORK, March 7 (Reuters) - U.S. Treasury yields rose on
Tuesday, with the 30-year yield at its highest in over a month
as investors made room for this week's supply of coupon-bearing
government debt, led by $24 billion worth of three-year notes.
    Investors have also reduced their bond holdings in
anticipation of an interest rate increase at the Federal
Reserve's policy meeting next week.
    Following the three-year note sale, the Treasury Department
will auction $20 billion in 10-year debt on
Wednesday and $12 billion in 30-year bonds on
    "It's hard to take this much duration risk before the Fed,"
said Aaron Kohli, interest rates strategist at BMO Capital
Markets in New York.
    The yield on benchmark 10-year Treasury notes
was up 2 basis points at 2.511 percent, while the 30-year yield
 was up nearly 2 basis points at 3.116 percent after
touching its highest level since Feb. 3, Reuters data showed.
    Bond yields jumped in reaction to comments from Fed
officials, including Fed Chair Janet Yellen, which spurred
traders to raise their bets that the central bank will lift
interest rates by a quarter of a percentage point, to 0.75-1.00
percent, at its policy meeting next week.     
    Interest rate futures implied traders priced in an 84
percent chance the Fed will raise rates at its upcoming meeting
, unchanged from late Monday, CME Group's FedWatch
tool showed.
  March 7 Tuesday 11:19AM New York / 1619 GMT
 US T BONDS JUN7               148-22/32    -0-12/32  
 10YR TNotes JUN7              123-116/256  -0-36/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.75         0.7619    0.010
 Six-month bills               0.845        0.8604    0.010
 Two-year note                 99-158/256   1.3216    0.013
 Three-year note               99-88/256    1.6041    0.022
 Five-year note                99-56/256    2.0408    0.027
 Seven-year note               98-168/256   2.3347    0.022
 10-year note                  97-176/256   2.5142    0.021
 30-year bond                  97-188/256   3.1169    0.020
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        32.25        -0.50    
 U.S. 3-year dollar swap        25.50        -1.00    
 U.S. 5-year dollar swap         9.00        -0.75    
 U.S. 10-year dollar swap       -4.75        -0.75    
 U.S. 30-year dollar swap      -41.00        -0.75    

 (Reporting by Richard Leong; Editing by Dan Grebler)

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