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Bonds News

TREASURIES-U.S. bond yields rise as stocks regain shine

* Treasuries lose appeal as stocks bounce on improved
outlook
    * U.S. Treasury sells $26 bln 2-year notes to mediocre
demand
    * U.S. yields initially climb on Brexit ruling, euro zone
data

 (Adds market action after U.S. 2-year auction)
    By Richard Leong
    NEW YORK, Jan 24 (Reuters) - U.S. Treasury yields rose on
Tuesday as investors snapped up equities on improved outlook on
corporate profits, trimming their safe-haven demand for bonds
spurred by U.S. President Donald Trump's protectionist trade
stance.
    The rise in bond yields, which reversed Monday's decline,
brought only a moderate bid to a $26 billion auction of two-year
notes, part of this week's $88 billion in coupon-bearing U.S.
government debt supply, analysts said.
    "We are mostly in a holding pattern until we get more
clarity on the fiscal side," said Gennadiy Goldberg, interest
rate strategist at TD Securities in New York.
    On Tuesday, Trump urged U.S. carmaker executives to build
more vehicles domestically and signed executive orders to speed
up the building of the Keystone XL and Dakota oil pipelines.
  
    These moves aimed to create jobs and investments followed
Trump's actions on Monday to revamp deals with its Asian and
North American trading partners which investors fear would hurt
exports and raise business costs.  
    Treasury yields initially climbed in step with their
European counterparts, following a high court ruling on
Britain's decision to bolt from the European Union and
encouraging data on euro zone manufacturing data.
    The court ruled Prime Minister Theresa May must get
parliament's approval before she begins Britain's formal exit
from the EU. It reduced the chances of a "hard Brexit" which
Britain would embark on a quick divorce from the economic bloc,
analysts said. 
    Britain's possible swift exit from the EU is seen as a drag
on Europe's and its own economy. 
    "What this vote does is that it creates a lot of friction in
the process. The likelihood of a hard Brexit outcome has
diminished," said Bruno Braizinha, interest rate strategist at
SG Corporate & Investment Banking in New York.
    The yield on benchmark 10-year Treasury notes 
was up 6 basis points at 2.465 percent. German 10-year Bund
 and British 10-year Gilt yields were up 
about 4 basis points. 
    The S&P 500 and Nasdaq hit record highs. 
    Bond yields' early increase was also underpinned by IHS
Markit's Euro Zone Flash Composite Purchasing Managers' Index,
seen as a gauge on regional growth, only dipped from December's
five-year high of 54.4 to 54.3. 
    The market selloff enticed yield-minded investors to buy
Tuesday's two-year note supply, but the overall demand was seen
average.  
    The ratio of bids to the two-year notes offered was 2.68, up
from 2.44 at the prior auction which was the weakest since
December 2008. 
    
    Tuesday, Jan 24 at 1415 EST (1915 GMT):
                                Price                    
 US T BONDS MAR7                150-19/32    -1-13/32    
 10YR TNotes MAR7               124-68/256   -0-140/256  
                                Price        Current     Net
                                             Yield       Change
                                             (pct)       (bps)
 Three-month bills              0.5025       0.5101      -0.005
 Six-month bills                0.6          0.6102      0.000
 Two-year note                  100-26/256   1.1965      0.049
 Three-year note                99-174/256   1.4855      0.054
 Five-year note                 100-84/256   1.9298      0.063
 Seven-year note                99-240/256   2.2597      0.069
 10-year note                   95-248/256   2.4652      0.064
 30-year bond                   96-132/256   3.0538      0.066
                                                         
   DOLLAR SWAP SPREADS                                   
                                Last (bps)   Net Change  
                                             (bps)       
 U.S. 2-year dollar swap         30.25        -1.75      
 spread                                                  
 U.S. 3-year dollar swap         21.75        -1.50      
 spread                                                  
 U.S. 5-year dollar swap          5.50        -1.75      
 spread                                                  
 U.S. 10-year dollar swap       -11.25        -1.50      
 spread                                                  
 U.S. 30-year dollar swap       -44.50        -0.75      
 spread                                                  
 
    

    
 (Reporting by Richard Leong; Editing by Nick Zieminski and
Grant McCool)
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