January 30, 2018 / 8:21 PM / a year ago

TREASURIES-Long-dated yields advance before Trump address, Fed decision

 (New throughout, updates prices, market activity and comments,
updates table)
    * U.S. 10-year yields rise to nearly 4-year peak
    * U.S. 30-year yields hit highest since May
    * Focus on Trump speech, Fed, U.S. jobs

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 30 (Reuters) - U.S. Treasury long-dated yields
rose on Tuesday ahead of a slew of events this week such as a
Federal Reserve monetary policy decision which could help shed
more light on the outlook for interest rates this year.
    Benchmark U.S. 10-year yields, which move inversely to
prices, touched their highest in nearly four years, while
30-year yields climbed to their highest since May 2017. 
    Gennadiy Goldberg, interest rates strategist at TD
Securities in New York, said investors were spooked by declines
on Wall Street overnight and on Tuesday, prompting a flight to
the safety of U.S. government bonds in early trade. 
    But then Treasuries prices fell as investors positioned for
President Donald Trump's first State of the Union address to
Congress later on Tuesday, the Fed statement on Wednesday, and
the impending U.S. non-farm payrolls report for January.
    Trump was expected to take credit for U.S. economic gains
and benefits from a tax overhaul approved by the
Republican-controlled Congress in December.
    The Fed will also be a big focus this week, with analysts
expecting it to hold rates steady, but strike a hawkish tone in
its statement. 
    The U.S. central bank on Tuesday kicked off its two-day
meeting, Fed Chairperson Janet Yellen's last after four years in
office. Fed Governor Jerome Powell will take over next month.
    "There is widespread risk for more upbeat assessments of
growth and inflation (from the Fed), especially now that tax
reform is in place," Action Economics wrote on its blog.
    Fed funds futures have priced in a 90 percent chance the Fed
will raise rates in March, a 65 percent probability of another
hike in June, and a more than 50 percent chance of further
tightening in December.
    In late trading, U.S. 10-year yields edged up to
2.727 percent, from Monday's 2.699 percent. Overnight, 10-year
yields hit 2.733 percent, the highest since April 2014.
    U.S. 30-year bond yields also rose to 2.973 percent
, up from 2.943 percent late Monday. The yield on
this maturity touched an 8-1/2-month peak of 2.989 percent
earlier in the session.
    The yield curve has steepened on Tuesday, with the spread
between five-year and 30-year yields widening to 47.40 basis
points.
    The gap between U.S. 2-year and 10-year yields rose to 60.10
basis points, the widest in three weeks.
    TD's Goldberg said Tuesday's steepening was just a reversal
of a generally flattening trend in the last couple of weeks,
with investors taking profits on those trades.
    
      January 30 Tuesday 3:02PM New York / 2002 GMT
                               Price                  
 US T BONDS MAR8               147-12/32    -0-24/32  
 10YR TNotes MAR8              121-168/256  -0-40/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.435        1.4603    0.007
 Six-month bills               1.6275       1.6638    -0.005
 Two-year note                 99-194/256   2.1243    0.000
 Three-year note               99-68/256    2.2581    0.000
 Five-year note                99-98/256    2.5071    0.010
 Seven-year note               99-8/256     2.6525    0.020
 10-year note                  95-244/256   2.7236    0.025
 30-year bond                  95-136/256   2.9772    0.034
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.00         0.25    
 spread                                               
 U.S. 3-year dollar swap        18.75         0.75    
 spread                                               
 U.S. 5-year dollar swap         7.00         0.25    
 spread                                               
 U.S. 10-year dollar swap        1.75        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -15.00        -0.75    
 spread                                               
 
 (Editing by Bernadette Baum and David Gregorio)
  
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