April 30, 2018 / 7:13 PM / 3 months ago

TREASURIES-Yield curve flattens; lackluster U.S. data tempers growth view

    * U.S. yield curve flattest in more than 6 years
    * U.S. long-dated yields fall to more than 1-week low
    * U.S. data overall was unimpressive 

 (New throughout, updates prices, market activity, comments and
table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 30 (Reuters) - The U.S. Treasury yield curve
flattened on Monday for a third straight session, as a slew of
data that missed expectations rekindled concerns about signs of
slowing growth in the world's largest economy.
    Investors look at the U.S. yield curve for clues about the
future economic outlook.
    The yield gap between U.S. 5-year notes and 30-year bonds
narrowed to 27.20 basis points, the tightest
spread in more than six years. 
    The other benchmark measure, the yield spread between U.S.
2-year and 10-year notes, was also flatter at 44.30 basis points
, the narrowest in two weeks.
    Yields on U.S. 30-year bonds and 10-year notes fell to a
more than a one-week low on Monday. The slide in 10-year yields
came after hitting more than 3 percent last week, the highest in
more than four years.
    "Fundamentally, we haven't seen the economic data that
justify a further run-up in long-term yields," said Mike Lorizo,
head of Treasuries trading at Manulife Asset Management in
Boston.
    Also fueling the downdraft in yields was month-end buying of
Treasuries as investors looked to rebalance between fixed income
and equities after a decent selloff in U.S. government bonds,
Lorizo added.
    U.S. Treasuries posted losses of 0.94 percent
through April 27, according to the Bloomberg Barclays Treasury
Index. Year to date, Treasuries were down 2.1 percent.
    The fall in yields started with the release of the personal
spending and consumption data. U.S. personal income rose just
0.3 percent in March, compared with expectations of 0.4 percent.
This was also revised lower in February to a rise of 0.3
percent, from the previously reported 0.4 percent increase.  
    The U.S. Midwest manufacturing index also came in slightly
lower than expected, with a reading of 57.6, while U.S. pending
home sales, while posting an increase, fell short of a forecast
for a 1.0 percent gain.
    Tom Simons, money market economist at Jefferies in New York,
said, however, he was not too worried about the slight miss in
expectations in Monday's data. "I don't think those would alter
the Fed's thinking on rates." 
    In afternoon trading, U.S. 10-year yields slipped to 2.936
percent from 2.957 percent late on Friday, touching
a 10-day low of 2.934 percent. 
    U.S. 30-year yields also dipped to 3.099 percent
from Friday's 3.125 percent. Earlier, 30-year yields fell to
3.095 percent, also a 10-day trough.
    U.S. two-year note yields, meanwhile, were slightly higher
at 2.487 percent from 2.484 percent on Friday.
    The Federal Open Market Committee, meanwhile, will have a
two-day meeting this week, but this is seen to be a non-event as
investors do not expect any rate action nor a significant change
in the policy statement's tone.
    
      April 30 Monday 3:04PM New York / 1904 GMT
                               Price                  
 US T BONDS JUN8               143-25/32    0-17/32   
 10YR TNotes JUN8              119-160/256  0-32/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.775        1.8073    -0.006
 Six-month bills               1.965        2.0117    0.000
 Two-year note                 99-200/256   2.4879    0.004
 Three-year note               99-82/256    2.6152    -0.003
 Five-year note                99-210/256   2.7888    -0.012
 Seven-year note               99-212/256   2.9023    -0.018
 10-year note                  98-104/256   2.9382    -0.019
 30-year bond                  98-16/256    3.0999    -0.025
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        26.00         0.75    
 spread                                               
 U.S. 3-year dollar swap        22.00         0.50    
 spread                                               
 U.S. 5-year dollar swap        11.50         0.75    
 spread                                               
 U.S. 10-year dollar swap        3.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -11.00         0.25    
 spread                                               
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Richard Leong; Editing by Jonathan Oatis and David Gregorio)
  
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