March 6, 2018 / 7:48 PM / 4 months ago

TREASURIES-Bonds steady as trade war, North Korea fears ease

 (Adds quotes, updates prices)
    * Fears about trade wars ease, boosting stocks
    * North Korean hopes reduce bond safety bid
    * $40 bln CVS bond sale seen weighing on prices

    By Karen Brettell
    NEW YORK, March 6 (Reuters) - U.S. Treasury yields were
little changed on Tuesday in choppy trading as optimism grew
that U.S. President Donald Trump may back down from proposed
steel and aluminum tariffs that have prompted concerns about a
global trade war.
    Top U.S. Republican politicians, including House of
Representatives Speaker Paul Ryan, on Monday urged Trump not to
go ahead with tariffs on foreign imports of steel and aluminum.

    Even though the president said he would not back down, he
suggested Canada and Mexico could be exempted if a new North
American Free Trade Agreement (NAFTA) was reached, which many
market participants see as the main motivation behind the plan.
    "It does seem as though Trump has laid out the fact that
he's using these tariffs as a negotiating tactic," said Gennadiy
Goldberg, an interest rate strategist at TD Securities in New
York.
    Benchmark 10-year note yields were last at 2.879
percent, unchanged on the day.
    The potential for easing tensions between the United States
and North Korea was seen helping reduce demand for safe-haven
U.S. bonds.
    Trump said on Tuesday he saw "possible progress" in
denuclearization efforts with North Korea after South Korea said
Pyongyang would be willing to meet with the United States and
suspend nuclear tests while talks proceed.
    CVS Health Corp's $40 billion, nine-part corporate bond sale
weighed on bonds earlier on Tuesday.
    "There was some concerns in the early morning about this big
deal with CVS going through and potential hedging needs," said 
John Herrmann, a director in rates strategies at MUFG Securities
Americas in New York.
    Speculation also swirled that Federal Reserve Governor Lael
Brainard may take a more hawkish tone in a speech scheduled for
Tuesday evening.
    "We’re hearing a bunch of whispers about how potentially
hawkish she may be tonight and that maybe she’s ready to shift
out of the uber dove camp into something more centrist,"
Herrmann said.
    Rising inflation and continued job market gains have
increased speculation that the U.S. central bank may hike rates
four times this year, more than the previously expected three
increases.
    The major economic focus this week will be Friday’s
employment report for February, which will be evaluated for
further signs of wage strength as an indicator of inflation.
    
    March 6 Tuesday 2:23PM New York / 1923 GMT
                               Price                  
 US T BONDS JUN8               143-12/32    0-9/32    
 10YR TNotes JUN8              120-12/256   0-4/256   
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.6525       1.6826    -0.005
 Six-month bills               1.8325       1.8753    0.005
 Two-year note                 100-2/256    2.2458    0.004
 Three-year note               99-142/256   2.4073    0.005
 Five-year note                99-230/256   2.6468    0.005
 Seven-year note               99-164/256   2.807     0.003
 10-year note                  98-228/256   2.879     0.000
 30-year bond                  97-84/256    3.1382    -0.013
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        27.75         1.00    
 spread                                               
 U.S. 3-year dollar swap        23.50         0.50    
 spread                                               
 U.S. 5-year dollar swap        11.25         1.25    
 spread                                               
 U.S. 10-year dollar swap        1.50         1.00    
 spread                                               
 U.S. 30-year dollar swap      -18.00         1.25    
 spread                                               
 

 (Reporting by Karen Brettell; Editing by Andrea Ricci)
  
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