Bonds News

TREASURIES-U.S. yield curve flattens with Europe

* Draghi's Thursday comments spur demand for longer-dated
    * 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
 US T BONDS DEC6               165          0-11/32   
 10YR TNotes DEC6              130-88/256   0-16/256  
                               Price        Current   Net
                                            Yield %   Change
 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       
 U.S. 2-year dollar swap        23.25        -0.50    
 U.S. 3-year dollar swap        14.75         0.00    
 U.S. 5-year dollar swap         2.00        -0.25    
 U.S. 10-year dollar swap      -16.00         0.50    
 U.S. 30-year dollar swap      -56.00         0.50    

 (Reporting by Richard Leong; Editing by Dan Grebler)