March 29, 2018 / 3:29 PM / 3 months ago

TREASURIES-U.S. yields fall as bond market springs back in March

    * U.S. yield curve hits flattest in more than a decade
    * Treasuries poised for gains in March after two months of
losses
    * Chicago PMI lowest in a year, consumer sector seen steady
    * U.S. bond market to close early, to shut on Friday

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, March 29 (Reuters) - U.S. Treasury yields fell on
Thursday, marking a comeback for the $14.6 trillion sector as
investors piled into low-risk government bonds on worries about
economic growth and a dramatic pullback in stock prices in
March.
    The U.S. bond market will close early at 2 p.m. (1800 GMT)
and shut for the Good Friday holiday. 
    Treasuries have generated a 0.72 percent total return in
March for its best month since August, rebounding from losses in
January and February. Still, they have produced a 0.11 percent
loss in the first three months of 2018, according to an index
compiled by Bloomberg and Barclays.
    "We are seeing some rotation out of equities into fixed
income," said Larry Milstein, head of government and agency
trading at R.W. Pressprich & Co. in New York. "Some of this has
to do with the pullback in stocks and some of it has to do with
what's coming out of Washington."
    Wall Street has sagged on fears about a global trade war
after U.S. President Donald Trump introduced tariffs against
China and other nations for perceived unfair trade practices.
Stock prices also tumbled on jitters about technology shares in
the wake a scandal over political consultants accessing Facebook
 data on 50 million users.
    The S&P 500 and Dow are on track for their worst quarter in
more than two years.
    Safe-haven bids for bonds supported demand for $294 billion
worth of Treasury bills and notes this week, a record amount,
traders and analysts said.
    "We made it through some significant supply here," Milstein
said.
    At 11:06 (1506 GMT), the yield on 10-year Treasury notes
 was down 1.8 basis points at 2.757 percent. It hit a
seven-week low of 2.743 percent on Wednesday.
    For the month, the 10-year yield has fallen 11 basis points,
its steepest decline since August. However, it has risen 35
basis points for the quarter.
    The drop in longer-dated yields on Thursday flattened the
yield curve to levels not seen in more than a decade.
    The spread between two-year and 10-year Treasury yields
 contracted to 46.70 basis points, the tightest
level since September 2007, Tradeweb data showed.
    A flattening curve is a proxy on investors' concerns over
slowing economic growth.
    The Chicago purchasing management index unexpectedly fell to
a one-year trough in March
    On the other hand, the jobs market has remained solid with
first-time filings for unemployment benefits hitting over a
45-year low last week. Consumer spending rose a second straight
month, while the University of Michigan said consumer confidence
ended March at its strongest level in more than 14 years.

March 29 Thursday 11:06AM New York / 1506 GMT
                               Price                   
 US T BONDS JUN8               146-12/32    0-16/32    
 10YR TNotes JUN8              121-12/256   0-36/256   
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             1.7          1.7307     -0.005
 Six-month bills               1.885        1.9292     -0.008
 Two-year note                 99-238/256   2.2862     0.000
 Three-year note               99-236/256   2.4024     -0.006
 Five-year note                99-162/256   2.5788     -0.012
 Seven-year note               99-132/256   2.7015     -0.022
 10-year note                  99-240/256   2.7571     -0.018
 30-year bond                  100-72/256   2.9856     -0.028
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        29.75         1.75     
 spread                                                
 U.S. 3-year dollar swap        25.50         1.50     
 spread                                                
 U.S. 5-year dollar swap        13.75         1.50     
 spread                                                
 U.S. 10-year dollar swap        3.50         1.25     
 spread                                                
 U.S. 30-year dollar swap      -15.25         1.25     
 spread                                                
 
    

    
 (Reporting by Richard Leong
Editing by Chizu Nomiyama)
  
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