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Funds News

TREASURIES-U.S. yields rise for a second day as auctions eyed

 (Updates prices, adds 3-year auction)
    By Chuck Mikolajczak
    NEW YORK, Sept 7 - U.S. government bond yields rose for a
second straight day on Tuesday, building on Friday's climb in
the wake of the government's jobs report and ahead of this
week's host of scheduled Treasury auctions.
    Data out Friday showed the fewest U.S. jobs created in seven
months in August, although underlying measures were fairly
strong, including a 0.6% wage increase that was double
expectations.
    Other data within the report are likely to keep the Federal
Reserve on track to taper its bond purchases by year-end.
European yields also rose ahead of Thursday's European Central
Bank meeting, with investors focused on any change to the pace
of the ECB's pandemic emergency bond purchases (PEPP) during the
fourth quarter.
    Investors await a flurry of supply this week, with auctions
for the 10-year note and 30-year bond on Wednesday and Thursday,
respectively, totaling $62 billion. 
    "On the surface it looked negative but the bond market was
able to look at the details and say as negative as the headline
numbers might have been, if you look through it as the Fed
probably will, it is probably not enough to stave off tapering
into next year," said Jim Barnes, director of fixed income at
Bryn Mawr Trust in Berwyn, Pennsylvania.
    "And also knowing you would have supply coming up this week,
both factors that had the most weight on pushing Treasury yields
higher," Barnes added.
    Auctions of $56 billion in 3-month bills and $53
billion in 6-month bills were well bid, according to
analysts, although the 8-week auction on Thursday is more likely
to reflect the risk the market sees surrounding the possible
expiration of the U.S. debt ceiling. 
    A $58 billion sale of 3-year notes was also solid, said
market participants. The 3-year yield was up 2.2
basis points at 0.429%
    The yield on 10-year Treasury notes was up 4.8
basis points at 1.370% after touching 1.385% shortly after the
three-month and six-month auctions, its highest since July 14.
    Congressional debate is expected to heat up in coming weeks
over the debt ceiling issue with Treasury due to run out of
money in October. Without an extension to Treasury's borrowing
limits, the risk of a technical default will weigh on short-term
debt.
    The yield on 8-week bills was down 0.3 basis
points at 0.071% after reaching 0.081%, the highest since March
15.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 114.6 basis points after hitting a high of
116.4, its steepest since July 14. 
    Markets are also awaiting news on whether the White House
will extend the tenure of Fed Chairman Jerome Powell, with a
decision likely this week.
    
      September 7 Tuesday 3:13PM New York / 1913 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.04         0.0406    -0.005
 Six-month bills               0.05         0.0507    -0.005
 Two-year note                 99-207/256   0.222     0.014
 Three-year note               99-216/256   0.4286    0.022
 Five-year note                99-168/256   0.8206    0.036
 Seven-year note               99-234/256   1.1378    0.043
 10-year note                  98-228/256   1.3698    0.048
 20-year bond                  97-104/256   1.907     0.043
 30-year bond                  100-84/256   1.9854    0.043
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.75         0.25    
 spread                                               
 U.S. 3-year dollar swap        11.75         0.25    
 spread                                               
 U.S. 5-year dollar swap         8.50        -0.25    
 spread                                               
 U.S. 10-year dollar swap        1.75         0.25    
 spread                                               
 U.S. 30-year dollar swap      -27.00         0.75    
 spread (Reporting by Chuck Mikolajczak; Editing by Will Dunham and
Richard Chang)
  
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