June 8, 2018 / 6:25 PM / 10 months ago

TREASURIES-U.S. yields dip as trade worries keep market on edge

    * Trump lashes out at trade partners ahead of G7 summit
    * Traders also cautious before Fed, ECB meetings
    * U.S. to sell $68 bln coupon-bearing debt next week

 (Updates to afternoon market action)
    By Richard Leong
    NEW YORK, June 8 (Reuters) - U.S. Treasury yields were
marginally lower on Friday on light volume as traders awaited
the outcome of the Group of Seven summit, fretting about growing
trade tensions between the United States and its major allies
and global economic growth.
    U.S. President Donald Trump on Friday lashed out at Canada
and the European Union before the weekend summit in Charlevoix,
Quebec, after he imposed tariffs last week on steel and aluminum
imports from the EU and Canada. Their leaders criticized Trump's
move and plan to retaliate with their own levies on U.S.
    Bond traders are also on edge ahead of next week's $66
billion coupon-bearing supply and possible signals on monetary
policy coming out of the meetings of U.S. Federal Reserve and
European Central Bank policy makers.
    Traders are also wary ahead of Trump's June 12 meeting with
North Korean leader Kim Jong Un in Singapore about Pyongyang's
nuclear weapons.
    "There are so many questions out there," said Thomas Roth,
head of Treasury trading at MUFG Securities America in New York.
"There's nervousness about the G7 summit and Trump's North Korea
    The yield on benchmark 10-year Treasury notes
was 2.926 percent, down 0.3 basis point from late Thursday. 
    The 10-year yield has been on a roller-coaster for two
weeks. It was on track to increase about 4 basis points this
week, reversing much of last week's drop to a seven-week low
tied to fears about political turmoil in Italy.
    Investors are also awaiting the outcome of the European
Central Bank's debate on Thursday about ending the expansion of
its 2.55 trillion euro ($3 trillion) bond purchase program in
    Traders waited for the Fed to signal how many times it would
raise interest rates for the rest of 2018 as domestic labor
conditions tighten and inflation moves closer to its 2 percent
    They widely expect the Fed to raise key overnight borrowing
costs by a quarter point to a 1.75 percent to 2.00 percent range
next Wednesday.
    On the supply front, the U.S. Treasury Department planned to
sell a combined $68 billion in three-year, 10-year and 30-year
securities next week.      
    This week's heavy supply of higher-yielding corporate bonds
has helped push up Treasury yields, analysts said.
    Companies have raised about $36.8 billion in the
investment-grade bond market this week, according to IFR, a unit
of Thomson Reuters.
June 8 Friday 2:20PM New York / 1820 GMT
 US T BONDS SEP8               143-10/32    1/32      
 10YR TNotes SEP8              119-176/256  3/32      
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.89         1.925     -0.005
 Six-month bills               2.065        2.1153    -0.003
 Two-year note                 100-8/256    2.4834    -0.021
 Three-year note               100-4/256    2.619     -0.014
 Five-year note                99-240/256   2.7634    -0.014
 Seven-year note               100-2/256    2.8737    -0.011
 10-year note                  99-140/256   2.9278    -0.005
 30-year bond                  100-236/256  3.0776    -0.002
         YIELD CURVE           Last (bps)   Net       
 10-year vs 2-year yield       43.80        0.85      
 30-year vs 5-year yield       31.10        0.80      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        28.00        -0.25    
 U.S. 3-year dollar swap        23.00        -0.50    
 U.S. 5-year dollar swap        14.00         0.00    
 U.S. 10-year dollar swap        5.75        -0.25    
 U.S. 30-year dollar swap       -7.25         0.25    
 (Reporting by Richard Leong
Editing by Nick Zieminski and Richard Chang)
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