January 3, 2018 / 3:53 PM / 14 days ago

TREASURIES-U.S. bond yields little changed before FOMC minutes

    * Investors await clues on rate-hike path in Dec FOMC
minutes
    * U.S. Dec ISM manufacturing data beat expectations
    * U.S. 2-year yield touches 9-year peak
    * Companies to sell $35 bln high-grade bonds this week - IFR

 (Updates market action after ISM data)
    By Richard Leong
    NEW YORK, Jan 3 (Reuters) - U.S. Treasury yields were little
changed on Wednesday in advance of minutes of last month's
Federal Reserve meeting, where policy makers decided to raise
short-term interest rates for a third time in 2017 and upgraded
their view on U.S. economic growth.
    Bond markets around the world stabilized from Tuesday's
selloff tied to hawkish comments from two European Central Bank
officials, which propelled the 10-year German Bund yield to a
two-month peak and the five-year U.S. yield
 to its highest level since April 2011.
    Some investors said Tuesday's yield rise was partly a
reversal of the drop linked to typical year-end buying.
    "A majority of yesterday's move was a move back of what
happened over the year-end holiday," said Jason Celente, senior
portfolio manager at Insight Investment in New York.
    Wednesday's initial drop in U.S. yields faded following a
stronger-than-forecast report on U.S. manufacturing from the
Institute for Supply Management.
    The industry group's index on U.S. factory activity
unexpectedly rose to 59.7 last month from 58.2 in November.
Analysts polled by Reuters forecast the ISM factory index likely
came in at 58.1.
    Evidence of further expansion in the factory sector will
likely support the notion of steady U.S. economic growth,
perhaps allowing the Fed to increase rates up to three times in
2018.
    Investors are also awaiting clues on the path of future rate
hikes in the minutes of the Dec. 12-13 meeting of the Federal
Open Market Committee (FOMC). They hope the minutes, set for
release at 2 p.m. (1900 GMT), will provide a better sense of the
FOMC's view of business activity before the passage of the
biggest rewrite of the U.S. tax code in 30 years. 
    "They want to know what the Fed was thinking about before
tax reform was passed," Celente said.    
    At 10:37 a.m. (1526 GMT), benchmark 10-year Treasury yield
 was down 0.5 basis point at 2.460 percent, while the
30-year yield was down 0.6 basis point at 2.806
percent. 
    The two-year yield reached a nine-year high at
1.939 percent. It was last up 0.8 basis point to 1.931 percent.
    Tuesday's yield spike also stemmed from bond dealers hedging
the slate of corporate bonds they underwrite this week, analysts
said.
    Companies are expected to sell $35 billion in
investment-grade corporate bonds this week, according to IFR, a
Thomson Reuters unit.   
January 3 Wednesday 10:41AM New York / 1541 GMT
                               Price                  
 US T BONDS MAR8               151-31/32    7/32      
 10YR TNotes MAR8              123-192/256  2/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.3925       1.4168    -0.030
 Six-month bills               1.56         1.5942    -0.016
 Two-year note                 99-230/256   1.9273    0.004
 Three-year note               99-158/256   2.0094    -0.006
 Five-year note                99-110/256   2.2465    -0.003
 Seven-year note               99-56/256    2.3719    -0.010
 10-year note                  98-52/256    2.4561    -0.009
 30-year bond                  98-248/256   2.8011    -0.009
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       52.70        -1.30     
 30-year vs 5-year yield       55.40        -1.15     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        17.50        -0.75    
 spread                                               
 U.S. 3-year dollar swap        18.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap         3.25         0.00    
 spread                                               
 U.S. 10-year dollar swap       -2.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -21.25         0.25    
 spread                                               
 
 

    
 (Reporting by Richard Leong; Editing by David Gregorio and Nick
Zieminski)
  
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