April 30, 2018 / 3:03 PM / 4 months ago

CORRECTED-TREASURIES-Yields curve flattens after slightly weaker-than-expected U.S. data

 (Correcting 8th paragraph to show personal income was revised
lower in February, not personal spending)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 30 (Reuters) - The U.S. Treasury yield curve
flattened on Monday for a third straight session, as a slew of
data that missed expectations, fanned some concerns about
slowing growth in the world's largest economy.
    The yield gap between U.S. 5-year notes and U.S. 30-year
bonds narrowed to 27.20 basis points, the lowest
spread in more than six years. 
    The other benchmark measure, the spread between U.S. 2-year
and 10-year notes, was also flatter at 45.60 basis points
, the narrowest in two weeks.
    Aaron Kohli, director of rates strategy at BMO Capital
Markets in New York, said U.S. data on Monday morning had been
mediocre, supporting the Treasury market's curve flattening
trend.
    There are also technical factors involved, he added.
    "The varying technicals in the curve highlight the Federal
Reserve's increasing control of the front-end and belly (5- and
7-year notes) and the extent to which the longer dated yields
(10s and 30s) have thus far resisted following the same
pattern," Kohli said.
    "We're likely to keep with the longer-term flattening view
in 2s/10s and 5s/30s till we see this technical divergence
correct."
    Data showed U.S. personal income rose just 0.3 percent in
March, compared with expectations of 0.4 percent. This was also
revised lower in February to a rise of 0.3 percent, instead of
the previously reported 0.4 percent increase.
    The U.S. Midwest manufacturing index also came in slightly
lower than expected, with a reading of 57.6, while U.S. pending
home sales, while posting an increase, fell short of a forecast
for a 1.0 percent gain.
    That said, Tom Simons, money market economist at Jefferies
in New York, noted that he was not too worried about the slight
miss in expectations for Monday's data. 
    "I don't think those would alter the Fed's thinking on
rates," Simons said. "We all know that inflation is still
trending on the positive side."
    In late morning trading, U.S. 10-year yields slipped to
2.949 percent from 2.957 percent late on Friday.
    U.S. 30-year yields also dipped to 3.108 percent
from Friday's 3.125 percent.
    U.S. two-year note yields, meanwhile, were slightly higher
at 2.492 percent from 2.484 percent on Friday.
    
      April 30 Monday 10:53AM New York / 1453 GMT
                               Price                  
 US T BONDS JUN8               143-18/32    0-10/32   
 10YR TNotes JUN8              119-136/256  0-8/256   
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.7825       1.815     0.002
 Six-month bills               1.9625       2.0091    -0.003
 Two-year note                 99-198/256   2.492     0.008
 Three-year note               99-76/256    2.6235    0.006
 Five-year note                99-194/256   2.8023    0.001
 Seven-year note               99-196/256   2.9123    -0.008
 10-year note                  98-80/256    2.9494    -0.008
 30-year bond                  97-224/256   3.1098    -0.015
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        25.75         0.50    
 spread                                               
 U.S. 3-year dollar swap        22.00         0.50    
 spread                                               
 U.S. 5-year dollar swap        11.00         0.25    
 spread                                               
 U.S. 10-year dollar swap        3.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -10.75         0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss;editing by Jonathan
Oatis)
  
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