March 11, 2019 / 3:14 PM / 2 months ago

TREASURIES-U.S. yields up as risk appetite rises, investors await supply

    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 11 (Reuters) - U.S. Treasury yields rose on
Monday after falling for four straight sessions as overall risk
appetite improved and equity markets generally stabilized, with
investors bracing for this week's slate of corporate supply and
government debt auctions.
    "This is a little bit of a pullback from Friday," said
Gennadiy Goldberg, interest rates strategist at TD Securities in
New York. "Risk is a little bit better and that's putting a bit
of pressure on Treasuries."
    U.S. government debt and corporate supply is also a big
factor this week, analysts said, with $78 billion in Treasury
auctions scheduled. The Treasury is set to auction $38 billion
in three-year notes later on Monday, $24 billion in 10-year
notes on Tuesday, and $16 billion in 30-year bonds on Wednesday.
    Investors typically sell Treasuries ahead of an auction to
push the yield higher so they can buy them at a lower price.
    On the corporate debt side, four U.S. investment grade deals
were announced on Monday, led by BB&T Bank, natural gas company
ONEOK, diversified holding company RELX Capital and Dominion
Energy.  
    Ahead of corporate supply, bond managers tend to hedge
against large interest rate moves by selling U.S. government
debt. 
    "Supply may be putting pressure on Treasuries as well," TD's
Goldberg said. "We're seeing the curve steepen a bit and that
may be on the back of corporate supply, or on the back of the
U.S. 10-year to 30-year issuance we'll see later this week."
    In late morning trading, U.S. 10-year note yields rose to
2.639 percent, up from 2.625 percent late on Friday.
    U.S. 30-year bond yields were also up at 3.031 percent
, from 3.009 percent on Friday.
    On the short end of the curve, U.S. 2-year yields climbed as
well to 2.471 percent, compared with Friday's 2.463 percent

    Ahead of Monday's auction, U.S. three-year notes were at
2.446 percent, up from 2.433 percent on Friday.
    Data showing U.S. retail sales unexpectedly rising 0.2
percent in January had little impact on Treasuries, as it was
offset by a downward revision in December sales to show a 1.6
percent drop instead of the previously reported 1.2 percent
fall. The December drop was the biggest since September 2009,
when the economy was emerging from recession.
    Following a weak U.S. non-farm payrolls report on Friday,
the retail sales data reinforced expectations the Federal
Reserve will not raise interest rates at all this year, said
Andrew Hunter, senior U.S. economist at Capital Economics in
London.
    "With the fiscal boost fading and the Fed's prior tightening
becoming a more serious drag, we continue to think the Fed's
next move will be to start cutting rates in early 2020," Hunter
added.
    
      March 11 Monday 10:50AM New York / 1450 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.395        2.4422    -0.012
 Six-month bills               2.45         2.5212    -0.003
 Two-year note                 100-13/256   2.4731    0.010
 Three-year note               100-38/256   2.4469    0.014
 Five-year note                99-178/256   2.4404    0.015
 Seven-year note               99-204/256   2.5319    0.015
 10-year note                  99-216/256   2.6429    0.018
 30-year bond                  99-92/256    3.0326    0.024
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        12.75         1.00    
 spread                                               
 U.S. 3-year dollar swap         9.25         0.75    
 spread                                               
 U.S. 5-year dollar swap         7.75         0.50    
 spread                                               
 U.S. 10-year dollar swap        2.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -19.75         0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Paul Simao)
  
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