(Adds details on two-year note auction, updates prices)
* Data due in week includes GDP, payrolls
* Fed expected to maintain dovish tone on Wednesday
* Treasury pays highest two-year yield in auction since 2011
* Government to sell $35 billion 5-year notes on Tuesday
* Five-, 30-year yield curve flattest since 2009
By Karen Brettell
NEW YORK, July 28 U.S. Treasuries yields rose
Monday and the gap between yields on five-year notes and 30-year
bonds slimmed to the least since 2009 ahead of a ream of data
and events this week, including a Federal Reserve meeting and
$93 billion of new debt supply.
Thirty-year bonds gained relative to
shorter-dated Treasuries, boosted by some safety buying as
stocks fell, and driven by investor demand for yield and a Fed
The gap between five- and 30-year yields
flattened to the lowest since 2009 at 154 basis points. The Fed
bought $1.07 billion in bonds due from 2036 to 2044 on Monday.
"The flight-to-quality trade is continuing to be in the back
end of the market," said Tom Tucci, head of Treasuries trading
at CIBC in New York.
Short- and intermediate-dated debt has underperformed on
expectations that the Fed is likely to begin raising interest
rates next year as the economy improves. New supply this week of
short- and intermediate-dated debt also weighed on the front
The U.S. government paid the highest two-year yields in an
acution since May 2011 on Monday when it sold $29 billion in new
notes at a high yield of 0.544 percent.
The Treasury will sell $35 billion in five-year notes on
Tuesday and $29 billion in seven-year notes on Wednesday as part
of $93 billion in new coupon-bearing debt this week. It will
also sell $15 billion in two-year floating rate notes on
Two-year note yields were last 0.51 percent, up
from 0.49 percent late on Friday.
Benchmark 10-year notes fell 7/32 in price to
yield 2.49 percent, up from 2.47 percent.
Treasuries temporarily erased price losses and yields fell
to session lows earlier on Monday after contracts to buy
previously owned U.S. homes unexpectedly fell in June, casting a
cloud over recovery in the housing market.
A major focus for the market is the Fed's meeting on July
29-30, where the U.S. central bank is expected to maintain a
dovish outlook as it grapples with still slow wage growth, even
as other data point to improving momentum in the economy.
The meeting will coincide with gross domestic product data
for the second quarter Wednesday, which is in focus after an
unexpected contraction in the first quarter that many blamed on
Other data this week includes housing, consumer confidence,
personal income and manufacturing, along with a key employment
report for July due on Friday.
"Everyone is staring down the barrel of a very, very crowded
data calendar," said Gennadiy Goldberg, an interest rate
strategist at TD Securities in New York.
(Editing by Bernadette Baum and James Dalgleish)