* Draghi's Thursday comments spur demand for longer-dated
bonds
* Positive technical signals add to curve-flattening trades
* Fed's Tarullo, Williams on tap
By Richard Leong
NEW YORK, Oct 21 (Reuters) - Longer-dated U.S. Treasury
yields fell on Friday in step with European counterparts,
pushing their yield curves to the flattest level in a week in
the wake of comments on bond purchases by European Central Bank
President Mario Draghi.
On Thursday, Draghi said there was no discussion at the
ECB's latest policy meeting on possible changes to its 1
trillion-plus euro bond purchase program. Any discussion on ECB
policy would occur at its Dec. 8th meeting.
Draghi's comments after an ECB policy meeting pushed against
speculation the central bank may begin paring its monthly bond
purchases with its stimulus program possibly ending as early as
March 2017.
Concerns about reduced ECB purchases had spurred selling in
longer-dated Treasuries, propelling their yields to four-month
highs earlier this week.
"Draghi basically told people they could play in the long
end," said Tom di Galoma, managing director at Seaport Global
Holdings in New York.
Positive technical signals, including the spread between
five-year and 30-year yields holding below its 200-day moving
average, also stoked buying of longer-dated Treasuries, traders
and analysts said.
Dealers' exit from hedges on this week's some $28 billion in
investment-grade corporate bonds added to the day's purchases of
longer-dated government debt, they said.
In early trading, benchmark 10-year Treasury notes
were up 3/32 in price to yield 1.735 percent, down 1
basis point from late Thursday. It reached a four-month peak at
1.841 percent on Monday.
The spread between U.S. five-year and 30-year yields
narrowed by 2 basis points to 123 basis points, while the spread
on German five-year and 30-year yields shrank 1 basis point to
nearly 110 basis points.
Fed Governor Daniel Tarullo was scheduled to speak about
financial regulation at 10:15 a.m. (1415 GMT), while San
Francisco Fed President John Williams was to deliver a speech at
a mortgage conference at 2:30 p.m. (1830 GMT).
October 21 Friday 10:17AM New York / 1417 GMT
Price
US T BONDS DEC6 165 0-11/32
10YR TNotes DEC6 130-88/256 0-16/256
Price Current Net
Yield % Change
(bps)
Three-month bills 0.3275 0.3323 0.000
Six-month bills 0.4625 0.47 0.003
Two-year note 99-216/256 0.8315 0.008
Three-year note 100-12/256 0.9839 0.008
Five-year note 99-104/256 1.2494 0.006
Seven-year note 98-248/256 1.5323 -0.005
10-year note 97-220/256 1.7382 -0.009
30-year bond 95-32/256 2.4823 -0.016
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 23.25 -0.50
spread
U.S. 3-year dollar swap 14.75 0.00
spread
U.S. 5-year dollar swap 2.00 -0.25
spread
U.S. 10-year dollar swap -16.00 0.50
spread
U.S. 30-year dollar swap -56.00 0.50
spread
(Reporting by Richard Leong; Editing by Dan Grebler)