TREASURIES-Prices dip ahead of U.S. supply this week

Mon Jun 9, 2014 3:34pm EDT

Related Topics

* US $62 bln supply in focus this week
    * US 10-year yields now higher than Spain's

 (Updates prices, adds comment, details)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, June 9 (Reuters) - U.S. Treasuries prices slipped
on Monday in quiet trading, pressured by a $62 billion sale of
new coupon-bearing government debt this week and steady risk
appetite following a strong U.S. jobs report last Friday.
    Yields on U.S. long-term securities rose for a second
straight day, helped as well by easing tensions between Russia
and Ukraine, analysts said.
    Officials from Ukraine and Russia met late on Monday in
last-minute talks brokered by the European Union to resolve a
dispute that could halt the flow of gas from Russia. Monday's
talks follow a tentative rapprochement last week when newly
installed Ukrainian President Petro Poroshenko and Russia's
Vladimir Putin met in France at commemorations of the World War
Two D-Day landings 
    U.S. bond supply, however, remained the focus of the week,
with the $62 billion Treasury coupon auctions, beginning with
Tuesday's $28 billion three-year note sale. That will be
followed by the sale of $21 bln in 10-year notes on Wednesday,
and $13 billion in 30-year bonds.
    "Some of today's weakness is just prepping for the auction
that's coming this week," said David Keeble, global head of
interest rates strategy at Credit Agricole in New York. 
    "It's the long ones on auction, so you've got to put
duration in the market and we're doing it now without much help
from Federal Reserve purchases that we've had before."
    Benchmark 10-year notes were last down 4/32 in
price to yield 2.613 percent, from 2.591 percent late on Friday.
    For the first time since April 2010, Spanish 10-year yields
fell below those of U.S. Treasuries. Spanish yields hit historic
lows of 2.584 percent.
    Italian five-year yields were also below U.S. equivalents,
highlighting the policy divergence between the European Central
Bank, which has launched further stimulus, and the Fed, which
has been reducing its asset purchases.
    The impending end of the Fed's quantitative easing has been
helped by upbeat U.S. non-farm payrolls, which increased by
217,000 last month, returning employment to its pre-recession
level. 
    U.S. five year note prices were down 4/32 to yield 1.682
percent.
    U.S. 30-year bonds fell 9/32 in price to yield 3.452 percent
, from 3.432 percent late on Friday.
    Investors are now looking to Tuesday's U.S. three-year note
auction, which has seen mixed results in the past despite steady
demand.
    Barclays Capital in a research note said on a three-month
moving average basis, domestic investment fund demand has
increased to 26 percent since February, while foreign investor
demand has declined by a similar proportion resulting in
broker-dealers still absorbing 56 percent of the auctioned
amount.
    The New York Federal Reserve, meanwhile, bought on Monday
$0.97 billion in bonds with maturities ranging from February 15,
2036 through May 15, 2044. Offers totaled $4.559 billion.

 (Editing by Diane Craft)
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.