November 28, 2016 / 8:20 PM / 9 months ago

TREASURIES-U.S. yields dip from highs on month-end buying, selloff respite

* Month-end buying supports Treasuries prices
    * Yields fall from multi-month and multi-year highs
    * Traders view Trump-induced selloff as possibly overdone
    * Italy referendum, ECB and OPEC meeting outcomes awaited

 (Updates prices, adds comment)
    By Sam Forgione
    NEW YORK, Nov 28 (Reuters) - U.S. Treasury yields fell on
Monday from last week's highs on month-end buying and views that
a selloff that followed the surprise U.S. presidential election
victory of Donald Trump may have gone too far. 
    Analysts said demand for U.S. government bonds, which
typically kicks in toward the end of the month as investors seek
to rebalance their portfolios, was supporting prices and pushing
down yields.
    Traders were also likely buying Treasuries on the view that
the selloff, which sent benchmark 10-year yields to a 16-month
high of 2.417 percent on Nov. 23 and two-year yields to a
6-1/2-year high of 1.17 percent on Friday, had become
overextended, analysts added. 
    "The selloff has been quite dramatic," said Subadra Rajappa,
head of U.S. rates strategy at Societe Generale in New York. "It
has kind of run ahead of itself."
    Fueling the selloff were bets that Trump will adopt policies
that increase spending and debt as well as spur growth and
inflation, all of which would likely erode the value of U.S.
bonds.
    U.S. 10-year Treasuries were last up 14/32 in
price to yield 2.3214 percent, from a yield of 2.370 percent
late Friday. Two-year notes were last up 1/32 in
price to yield 1.1109 percent, from a yield of 1.135 percent
late Friday. 
    Other maturities were also lower in yield, with 30-year
yields last down three basis points from late Friday
at 2.9851 percent and seven-year yields last down
five basis points at 2.1371 percent. 
    "I would say a little bit of it is probably the month-end
buying after a very significant move earlier in the month," said
Lou Brien, a market strategist at DRW Trading in Chicago. He
said weakness in U.S. stocks was also spurring demand for
safe-haven Treasuries. 
    The benchmark S&P 500 stock index was last down 0.33
percent. U.S. Treasuries are on track to fall 2.7 percent in
November to mark their worst monthly performance since Jan.
2009, according to Bloomberg Barclays index data. 
    Rajappa of Societe Generale said investors were also bracing
for Italy's Dec. 4 referendum on constitutional reform and the
Dec. 8 meeting of the European Central Bank. Uncertainty over
the outcomes of those events has likely contributed to the pause
in the Treasury market's selloff, Rajappa said. 
    Traders are also awaiting Friday's U.S. November jobs
report. Economists polled by Reuters expect U.S. employers to
have added 175,000 jobs. 
    
    November 28 Monday 3:04PM New York / 2004 GMT
                               Price                  
 US T BONDS DEC6               153-20/32    0-26/32   
 10YR TNotes DEC6              125-160/256  0-108/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.465        0.472     -0.030
 Six-month bills               0.5875       0.5974    -0.036
 Two-year note                 99-200/256   1.1109    -0.024
 Three-year note               98-238/256   1.37      -0.040
 Five-year note                99-192/256   1.8025    -0.044
 Seven-year note               99-244/256   2.1322    -0.057
 10-year note                  97-44/256    2.3196    -0.050
 30-year bond                  97-212/256   2.9851    -0.033
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        20.25        -0.50    
 spread                                               
 U.S. 3-year dollar swap        13.00         0.25    
 spread                                               
 U.S. 5-year dollar swap        -2.00         0.50    
 spread                                               
 U.S. 10-year dollar swap      -16.75         0.75    
 spread                                               
 U.S. 30-year dollar swap      -56.00         0.75    
 spread                                               
 
 (Reporting by Sam Forgione and Karen Brettell; Editing by
Bernadette Baum)

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