November 7, 2017 / 2:13 PM / 13 days ago

TREASURIES-U.S. yields little changed before 3-year note auction

    * U.S. 3-year note supply seen sold at highest yield since
2010
    * U.S. yield curve hovers at flattest level in a decade

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Nov 7 (Reuters) - U.S. Treasury yields were little
changed on Tuesday in advance of a $24 billion auction of
three-year government debt, the first part of this week's $64
billion quarterly refunding whose proceeds will be used to repay
$42.7 billion to bondholders.
    Steady yields kept the U.S. yield curve near its flattest
level in a decade. 
    Traders have favored longer-dated Treasuries over
shorter-dated issues on expectations of further interest rate
increases from the Federal Reserve and domestic inflation
staying below the Fed's 2-percent target, analysts said.
    "Demand should be should be soft for the 3-year (Treasury
supply) on Tuesday, but 'acceptable' for the 10- and 30-year
auction," Evercore ISI strategist Stan Shipley wrote in a
research note.
    Weak bidding for the latest three-year note supply,
particularly from overseas investors, might force bond dealers
to purchase more and resell them at a loss, analysts said.
    Dealers have bought more three-year notes at auction in
September and October than their recent average, Treasury data
showed.
    The Treasury Department will sell the three-year note issue 
 at 1 p.m. (1800 GMT). It will auction $23 billion
in 10-year debt on Wednesday and $15 billion in
30-year bonds on Thursday.
    In "when-issued" activity, traders expected the upcoming
three-year note to fetch a yield of 1.749
percent, which would be its highest yield at an auction since
April 2010, according to Tradeweb data.
    At 8:52 a.m. (1352 GMT), the benchmark 10-year Treasury
yield was 2.320 percent, unchanged from late Monday
when it hit a two-week low.
    The 30-year yield was 2.793 percent, flat on the
day, after touching its lowest level since late September on
Monday.
    The two-year yield was a tad higher at 1.625
percent, leaving its spread against 10-year yield just below 70
basis points, which was a level last seen in
November 2007, Reuters data showed. 
               
November 7 Tuesday 8:52AM New York / 1352 GMT
                               Price                  
 US T BONDS DEC7               154-10/32    0-3/32    
 10YR TNotes DEC7              125-88/256   -0-4/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.1975       1.2179    0.005
 Six-month bills               1.31         1.337     0.008
 Two-year note                 99-194/256   1.6249    0.004
 Three-year note               99-180/256   1.7291    0.000
 Five-year note                100-16/256   1.9867    0.000
 Seven-year note               100-124/256  2.1748    0.000
 10-year note                  99-100/256   2.3199    0.000
 30-year bond                  99-32/256    2.7934    -0.003
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       69.30        0.20      
 30-year vs 5-year yield       80.50        -0.40     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        20.75         0.25    
 spread                                               
 U.S. 3-year dollar swap        20.25         0.00    
 spread                                               
 U.S. 5-year dollar swap         7.25         0.00    
 spread                                               
 U.S. 10-year dollar swap       -3.00        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -27.00         0.25    
 spread                                               
 
    
 (Reporting by Richard Leong; Editing by Andrea Ricci)
  

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