September 6, 2017 / 7:10 PM / 2 months ago

TREASURIES-U.S. yields rise as fiscal plan gains Trump's support

    * Benchmark 10-year yields rise from near 10-month low
    * October Treasury bill rates tumble but Dec T-bill rates
rise
    * Fed's Beige Book shows growth pickup, muted inflation
    * Fed Vice Chair Fischer resigns, to leave in October

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Sept 6 (Reuters) - U.S. Treasury yields rose on
Wednesday as a congressional fiscal plan that includes a
three-month suspension of the debt ceiling gained support from
President Donald Trump, reducing safe-haven demand among
investors worried about a short-term default.
    The proposal from top Congressional Democrats also seeks to
fund the government to avert a shutdown as well as programs
aimed to help those affected by Hurricane Harvey.
    "That took pressure off the rates market, but we could see a
replay in December," said Guy LeBas, chief fixed-income
strategist at Janney Montgomery Scott in Philadelphia.
    Investors have been concerned that a potential block on the
Treasury's ability to sell more debt could result in a partial
government shutdown, or even a default that could roil financial
markets.
    Investors had dumped Treasury bills that mature in October
on worries the government would delay repaying them if the debt
ceiling were not increased in time.
    Interest rates on Treasury bills due in October tumbled on
news of a short-term increase in the federal borrowing limit,
currently at $19.9 trillion, but those on T-bills due in
December jumped.
    Interest rates on T-bills due on Oct. 5 fell
over 20 basis points to 1.0425 percent, its lowest since
Thursday. T-bill rates on other October issues fell anywhere
from 2 basis points to 26 basis points, Reuters data showed.
    The Treasuries market sell-off was underpinned by the
Federal Reserve's Beige Book which showed a pickup in business
activity but inflation remained subdued in July through
mid-August prior to Harvey.
    Another day of heavy corporate bond supply also curbed
investor demand on lower-yielding Treasuries.
    The rise in longer-dated Treasury yields was limited by
jitters about further nuclear weapon tests by North Korea and
concerns about Hurricane Irma, a powerful storm heading toward
the southern United States.
    The 10-year Treasury yield fell to 2.054 percent
earlier Wednesday, the lowest since Nov. 10, before rising to
2.103 percent in late trading. 
    Separately, Fed Vice Chair Stanley Fischer, said on
Wednesday he would step down from his position on or around Oct.
13 for personal reasons, before his term expires next year.

    The absence of Fischer, who is seen to espouse a centrist
view on monetary policy, will unlikely change the Fed's gradual
interest rate-hike path and its possible announcement of a plan
to shrink its $4.5 trillion balance sheet in September, analysts
said.
  September 6 Wednesday 2:58PM New York / 1858 GMT
                               Price                  
 US T BONDS DEC7               156-11/32    -0-21/32  
 10YR TNotes DEC7              127-24/256   -0-84/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.0475       1.0649    0.026
 Six-month bills               1.1425       1.1651    0.023
 Two-year note                 99-228/256   1.3061    0.016
 Three-year note               100-62/256   1.4154    0.024
 Five-year note                99-182/256   1.6857    0.038
 Seven-year note               99-152/256   1.9375    0.041
 10-year note                  101-72/256   2.1064    0.036
 30-year bond                  100-144/256  2.7224    0.033
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        22.50         0.75    
 spread                                               
 U.S. 3-year dollar swap        19.75         0.75    
 spread                                               
 U.S. 5-year dollar swap         7.00         0.25    
 spread                                               
 U.S. 10-year dollar swap       -4.75         0.50    
 spread                                               
 U.S. 30-year dollar swap      -34.50         1.00    
 spread                                               
 
    

 (Reporting by Richard Leong; Editing by Frances Kerry and
Richard Chang)
  

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