December 28, 2017 / 2:22 PM / 24 days ago

TREASURIES-Prices dip before seven-year auction

    * U.S. to sell $28 bln seven-year notes
    * Month-end extension buying ebbs

    By Karen Brettell
    NEW YORK, Dec 28 (Reuters) - U.S. Treasury prices dipped on
Thursday, giving back some of Wednesday’s strong month-end
extension rally, as investors prepared for the Treasury
Department’s $28 billion sale of seven-year notes.
    Benchmark 10-year note yields fell as low as 2.407 percent
on Wednesday, from 2.479 percent, as investors sought to extend
the duration of their bond portfolios before year-end.
    “A lot of this month-end buying is getting done before the
actual month-end,” said Tom di Galoma, a managing director at
Seaport Global Holdings in New York. “There is so much duration
that needs to be bought at month-end and markets are very thin.”
    The 10-year yields             rose back to 2.427 percent on
Thursday with no major news or economic catalysts to drive
market direction.
    The Treasury will auction $28 billion in seven-year notes on
Thursday, the final sale of $88 billion in coupon-bearing supply
this week.
    The United States saw below average demand for a $26 billion
sale of two-year notes on Tuesday and a $34 billion sale of
five-year notes on Wednesday.                          
    Short- and intermediate-dated debt is highly sensitive to
interest rate hikes and the notes have also been under pressure
since October on expectations that the Treasury will increase
supply next year as the Federal Reserve reduces its bond
purchases.
    The Treasury is expected to initially concentrate supply
increases in Treasury bills and shorter-dated notes.
    The Fed has indicated that an additional three increases are
likely next year, though interest rate futures traders are
pricing in only two.

 (Editing by Susan Thomas)
  
 
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