Bonds News

TREASURIES-Intermediate-dated yields rise after auctions

 (Recasts with auction results, adds quote, data, updates
    By Karen Brettell
    NEW YORK, April 26 (Reuters) - U.S. intermediate-dated
Treasury yields rose on Monday after the Treasury Department
sold $121 billion in short- and intermediate-dated debt to mixed
demand, and ahead of this week’s Federal Reserve meeting.
    A $60-billion sale of two-year notes was soft while a
$61-billion sale of five-year notes was seen as average, with
both yields pricing just a fraction higher than where they had
traded before the auction.
    A $62-billion auction of seven-year notes will be closely
watched on Tuesday, after the Treasury saw very weak demand for
the debt in February, sparking a broad market selloff. The notes
also saw tepid, albeit improved, demand in March.
    “Tomorrow should be a bit stronger than February and March
just given the start of Japanese fiscal new year,” said Benjamin
Jeffery, an interest rate strategist at BMO Capital Markets in
New York.
    Japanese investors have increased their purchases of foreign
bonds since the start of their new fiscal year on April 1, which
analysts say is helping demand for Treasuries.
    “In the last few weeks there has been clearly demand for
U.S. Treasuries, and especially in the belly of the curve, so I
think it will go ok,” said Justin Lederer, an interest rate
strategist at Cantor Fitzgerald in New York.
    That said, yields could rise heading into the sale and
investors may also be cautious before the Fed meeting, Lederer
    Benchmark 10-year note yields were little
changed on the day at 1.570%. They have dropped from a more than
one-year high of 1.776% last month.
    Two-year yields and five-year yields
both gained one-and-a-half basis points to 0.172% and 0.831%,
respectively. Seven-year yields rose one basis point
to 1.261%.
    The Fed is expected to confirm that it will hold rates near
zero for years to boost the economy when it concludes its
two-day meeting on Wednesday.
    Market participants will also be watching to see if the U.S.
central bank raises the interest it pays on excess reserves
(IOER) and reverse repo as borrowing rates in the overnight
repurchase agreement market intermittently trade negative and
short-term bill yields approach zero.
    Overnight repo rates were at two basis points on
Monday. They traded as low as minus six basis points last month.
    One-month Treasury bill yields bounced as high as
four basis points on Monday, after dropping as low as one-fifth
of a basis point last week.
    The federal funds rate, however, has stayed steady at seven
basis points, except for a brief dip to six basis points on
March 31, which may prompt the Fed to leave rates unchanged.
Analysts expect the Fed will hike IOER if the fed funds rate
falls below five basis points.
    Data on Monday showed that new orders for key U.S.-made
capital goods rose solidly in March and shipments surged,
cementing expectations that economic growth accelerated in the
first quarter as massive government aid and improving public
health boosted demand.
      April 26 Monday 3:00PM New York / 1900 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.015        0.0152    -0.005
 Six-month bills               0.035        0.0355    0.001
 Two-year note                 99-233/256   0.1717    0.015
 Three-year note               100-20/256   0.3485    0.014
 Five-year note                99-156/256   0.8311    0.015
 Seven-year note               99-238/256   1.2606    0.010
 10-year note                  95-248/256   1.5702    0.003
 20-year bond                  95-236/256   2.1284    -0.009
 30-year bond                  92-4/256     2.2438    -0.007
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        11.00        -1.00    
 U.S. 3-year dollar swap        12.75        -0.75    
 U.S. 5-year dollar swap         9.25        -0.25    
 U.S. 10-year dollar swap       -1.00        -0.50    
 U.S. 30-year dollar swap      -27.25        -0.75    
 spread (Editing by Toby Chopra and Sonya Hepinstall)