October 18, 2018 / 4:28 PM / 9 months ago

TREASURIES-U.S. yields dip as stock losses offset rate-hike worries

    * FOMC Sept minutes hint at further U.S. rate increases
    * Draghi's warning, Mnuchin pullout from summit weigh 
    * U.S. Treasury to sell $5 bln 30-year TIPS at 1 p.m. 
    * U.S. to sell $108 bln in fixed-rate debt next week

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Oct 18 (Reuters) - U.S. Treasury yields edged
lower on Thursday as safe-haven demand fueled by more losses on
Wall Street mitigated selling tied to worries about further
interest rate increases from the Federal Reserve.
    Jitters about more Fed rate hikes propelled the 10-year
yield to a one-week high and spurred selling in short-term rate
futures, raising borrowing costs in money markets.
    "While there were no surprises, this was a reaffirmation of
the hawkish rhetoric from Fed officials we have been hearing 
the past several weeks," said Subadra Rajappa, head of U.S.
rates strategy at SG Corporate & Investment Banking in New York.
    On Wednesday, the Fed released the minutes from its Sept.
25-26 policy meeting, when central bank officials agreed to
increase borrowing costs by a quarter point to 2.00-2.25
    The minutes suggested they assessed the pace of economic
growth might be strong enough to raise rates more than what some
traders had thought.
    An initial rise in Treasury yields on Thursday faded as more
than 1 percent drops in major U.S. stock indexes accelerated on
rate-hike worries and disappointing earnings from several
industrial companies.
    A warning from European Central Bank President Mario Draghi
about undermining the European Union's budget rules and U.S.
Treasury Secretary Steven Mnuchin's withdrawal from an
investment summit in Saudi Arabia next week also weighed on
investor sentiments toward holding risky assets, analysts said.

    Fed policy-makers' view was supported by data on Thursday
that showed the number of Americans on jobless rolls fell to
levels last seen in 1973, suggesting a further tightening in the
labor market.
    Shortly before 12:30 p.m. (1630 GMT), the benchmark 10-year
Treasury yield was 3.181 percent, 0.6 basis point
lower than late Wednesday. It reached a one-week peak of 3.179
percent earlier Thursday, which was below a 7-1/2 year peak of
3.261 percent reached last week.
    The 30-year yield was 3.360 percent, up
marginally from late Wednesday.
    The Dow and S&P 500 were down 1.10 percent and
1.31 percent, respectively.    
    On the supply front, the Treasury Department will sell a
combined $108 billion in two-year, five-year and seven-year
fixed-rate government debt supply next week.
    At 1 p.m. (1300 GMT), the Treasury is scheduled to sell $5
billion in 30-year Treasury Inflation Protected Securities
October 18 Thursday 12:13PM EDT/ 1613 GMT
 US T BONDS DEC8               138-8/32     0-3/32     
 10YR TNotes DEC8              118-40/256   0-28/256   
                               Price        Current    Net
                                            Yield %    Change
 Three-month bills             2.2675       2.3121     0.002
 Six-month bills               2.405        2.4682     0.002
 Two-year note                 99-196/256   2.8741     -0.008
 Three-year note               99-196/256   2.9574     -0.014
 Five-year note                99-82/256    3.0237     -0.017
 Seven-year note               99-80/256    3.1106     -0.015
 10-year note                  97-132/256   3.171      -0.008
 30-year bond                  93-112/256   3.3495     0.003
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
 U.S. 2-year dollar swap        22.00         2.00     
 U.S. 3-year dollar swap        19.75         2.00     
 U.S. 5-year dollar swap        15.00         2.00     
 U.S. 10-year dollar swap        6.50         0.75     
 U.S. 30-year dollar swap       -8.50         0.00     

 (Reporting by Richard Leong; Editing by Dan Grebler)
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