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TREASURIES-Yields rise before supply, yield curve flattens
July 28, 2014 / 4:05 PM / 3 years ago

TREASURIES-Yields rise before supply, yield curve flattens

(Adds quote, details on yield curve, updates prices)
    * Data due in week includes GDP, payrolls
    * Fed expected to maintain dovish tone on Wednesday
    * Treasury to sell $93 bln two-, five-, seven-year notes
    * Five-yr, 30-yr yield curve flattest since 2009

    By Karen Brettell
    NEW YORK, July 28 (Reuters) - 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 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
buyback.
    The gap between five-year and 30-year yields 
flattened to the lowest since 2009 at 155 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 rates next
year as the economy improves. New supply this week of short and
intermediate-dated debt also weighed on the front end.
    The Treasury will sell $93 billion of new coupon debt,
including $29 billion of two-year notes on Monday, $35 billion
in five-year notes on Tuesday and $29 billion in seven-year
notes on Wednesday. It will also sell $15 billion in two-year
floating rate notes on Wednesday.
    Two-year note yields rose to 0.51 percent before
the auction, up from 0.49 percent late on Friday.
    Benchmark 10-year notes were last down 5/32 in
price to yield 2.48 percent, up from 2.47 percent late Friday. 
    Treasuries temporarily erased price losses and yields fell
to session lows 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 anticipated to see if
an unexpected contraction in the first quarter will be revised.
    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)

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