October 16, 2018 / 6:43 PM / in a month

TREASURIES-U.S. yields budge little as market settles into tight range

    * U.S. job openings hit record, industrial output data solid
    * Traders eye Italy, Brexit, Middle East developments 
    * Investors pare bearish U.S. bond bets - J.P. Morgan
    * Traders await FOMC minutes for clues on rate-hike path

 (Updates market action to mid-afternoon)
    By Richard Leong
    NEW YORK, Oct 16 (Reuters) - U.S. Treasury yields were
little changed on Tuesday as the bond market settled into a
tight trading range in the aftermath of wild swings stemming
from worries about inflation and a rout across global equities.
    Geopolitical risks and rising government debt also
contributed to recent market volatility that propelled the
benchmark 10-year Treasury yield to a 7-1/2 year peak last week.
    "Following the extraordinary volatility in both stocks and
bonds, we are seeing a bit of a calming here as traders are
looking for new ranges," said John Canavan, market strategist at
Stone & McCarthy Research Associates in New York.
    Investors scaled back bearish bets on longer-dated U.S.
government debt this week, suggesting less selling pressure on
Treasuries, according to a survey released by J.P. Morgan
Securities on Tuesday.
    On moderate trading volume, the 10-year Treasury yield
 was down marginally at 3.160 percent. A week ago, it
reached a seven-plus year high at 3.261 percent.
    The 30-year yield slipped half a basis point at 
3.336 percent, which was below the four-year peak at 3.446
percent set last week.
    Short-to-medium Treasury yields were slightly higher, with
the two-year yield at 2.870 percent.
    While monitoring Brexit, Italy and the Middle East, traders
did not shift their bond positions based on the latest
developments.
    On Monday, Italy approved a 2019 government budget that
would raise its deficit, paving the way for a showdown with the
European Commission over compliance with European Union rules.

    British Prime Minister Theresa May is hoping for an
agreement with the EU for her country to leave the economic bloc
at a meeting on Wednesday.
    An international outcry has ensued against Saudi Arabia in
the wake of the disappearance of columnist Jamal Khashoggi, a
critic of the Saudi crown prince.
    Meanwhile, domestic data signaled the U.S. economy likely
grew at a solid pace in the third quarter. The Labor Department
said domestic job openings grew to 7.14 million in August, the
highest on record, while the Federal Reserve Board said
industrial production rose 0.3 percent last month, slightly
stronger than an expected 0.2 percent gain.
    Against this upbeat economic backdrop, traders await
possible clues on the Fed's stance on future hikes when it
releases the minutes of its September policy meeting at 2 p.m.
(1800 GMT) on Wednesday.
    Growing U.S. government debt, which is expected to increase
in the coming decade to fund a rising federal deficit, is also a
long-term driver of U.S. yields.    
    The Treasury Department debuted a two-month bill issue worth
$25 billion to solid demand. It will sell $5 billion in 30-year
Treasury Inflation Protected Securities on Thursday.
 
October 16 Tuesday 2:35PM EDT/ 1835 GMT
                               Price                   
 US T BONDS DEC8               138-14/32    0-5/32     
 10YR TNotes DEC8              118-44/256   0-4/256    
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             2.265        2.3098     -0.002
 Six-month bills               2.4          2.4632     -0.013
 Two-year note                 99-198/256   2.8697     0.009
 Three-year note               99-198/256   2.9546     0.006
 Five-year note                99-86/256    3.0202     0.002
 Seven-year note               99-86/256    3.1068     -0.001
 10-year note                  97-152/256   3.1614     -0.002
 30-year bond                  93-176/256   3.3356     -0.005
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        19.00        -0.75     
 spread                                                
 U.S. 3-year dollar swap        17.00        -0.50     
 spread                                                
 U.S. 5-year dollar swap        13.00         0.25     
 spread                                                
 U.S. 10-year dollar swap        5.75         0.75     
 spread                                                
 U.S. 30-year dollar swap       -9.00         1.00     
 spread                                                
 
    
 (Reporting by Richard Leong; Editing by Jeffrey Benkoe and Tom
Brown)
  
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