October 19, 2016 / 6:30 PM / a year ago

TREASURIES-U.S. bonds little changed on supply hedging

* Saudi Arabia launches $17.5 billion global bond deal
    * U.S. housing starts fall to 1-1/2 year low in September
    * Fed's Beige Book: signs of rising wage pressure
    * Traders await clues from ECB on bond purchase program

 (Updates after Fed releases Beige Book)
    By Richard Leong
    NEW YORK, Oct 19 (Reuters) - U.S. Treasury yields were
little changed on Wednesday as dealers bought and sold
government bonds to hedge securities they underwrote, which was
led by Saudi Arabia's first-ever global bond issue.
    Saudi Arabia's $17.5 billion multipart debt offering drew
heavy demand as the world's top oil exporter sought to borrow at
historic low yields. 
    Bond dealers typically sell Treasuries to hedge against an
issue they underwrite and then buy them back after it is sold.
    "It's a huge deal. There's some rate-lock selling," said
Mary Ann Hurley, vice president of fixed income with D.A.
Davidson in Seattle. "As the Saudi deal gets put away, you could
see some reversal of that rate-lock selling."
    Benchmark U.S. 10-year Treasury notes were up
1/32 in price to yield 1.743 percent, down half a basis point
from late Tuesday. The 10-year yield remained below a four-month
peak of 1.841 percent reached on Monday.
    The two-year yield was flat at 0.799 percent, and the
30-year yield was little changed at 2.508 percent. 
 
    Bond yields swung a bit after data showed a 38 percent
tumble in U.S. apartment construction in September, knocking
overall home building activity to its weakest in 1-1/2 years.
 
    "That number is downright terrible," said Stan Shipley, a
strategist at Evercore ISI in New York.
    Some analysts noted the report had a bright spot: domestic
single-family home construction rose 8 percent to its strongest 
in seven months.
    The Federal Reserve's latest Beige Book, commenting on
current economic condition and released on Wednesday,
acknowledged moderate U.S. growth, with signs of rising wage
pressure in September. 
    Meanwhile, investors awaited possible clues on the European
Central Bank's thinking on its 1 trillion-plus euro bond
purchase program that may conclude as early as March 2017. 
 
    Traders have been speculating over whether the ECB, which
will hold a policy meeting on Thursday, would consider paring
its quantitative easing as Europe keeps struggling with weak
growth and faces Britain's exit from the European Union.
    "The market has come to realize central banks have pretty
much done all they can to help markets," D.A. Davidson's Hurley
said. "Still the ECB will maintain its accommodative stance."
   Oct. 19, Wednesday 2:08 EDT/1808 GMT
                               Price                  
 US T BONDS DEC6               164-15/32    0-6/32    
 10YR TNotes DEC6              130-88/256   0-12/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.3275       0.3323    -0.016
 Six-month bills               0.4625       0.47      -0.010
 Two-year note                 99-230/256   0.8027    -0.008
 Three-year note               100-34/256   0.9548    -0.008
 Five-year note                99-134/256   1.2246    -0.011
 Seven-year note               99           1.5273    -0.007
 10-year note                  97-208/256   1.7432    -0.005
 30-year bond                  94-152/256   2.5085    -0.003
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        22.75         0.25    
 spread                                               
 U.S. 3-year dollar swap        14.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         1.75         0.25    
 spread                                               
 U.S. 10-year dollar swap      -17.25        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -57.25        -0.25    
 spread                                               
 
    
    

 (Editing by Chizu Nomiyama, David Gregorio and Jeffrey Benkoe)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below