November 6, 2018 / 7:51 PM / 7 days ago

TREASURIES-U.S. bond yields rise on supply before election results

    * All-time high on indirect bids for record 10-year note
supply
    * Bearish bond bets cut before U.S. elections -survey
    * Traders await possible rate-hike clues from Federal
Reserve

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Nov 6 (Reuters) - U.S. Treasury yields rose
modestly on Tuesday as selling spurred by this week's record
amounts of longer-dated government debt supply offset investors'
anxiety about the outcome of high-stake U.S. congressional
elections.
    The $27 billion 10-year note auction, the second leg of this
week's $83 billion quarterly refunding, fetched solid demand
with indirect bidders buying a record amount.
    Treasury supply has been growing to fund a widening federal
budget deficit as a result of the massive tax cut enacted in
December and a spending agreement reached in February. 
    The Treasury Department will complete the refunding which
would raise $28.7 billion in fresh cash with a record $19
billion 30-year bond sale on Wednesday.

    "The 10-year auction did go well with the indirect bids,"
said John Canavan, market strategist at Stone & McCarthy Reserve
Associates in New York. "It does create a bit of optimism for
tomorrow."
    After the 10-year auction, investors increased their focus
on the congressional elections. 
    The latest polls show Democrats favored to win control of
the U.S. House of Representatives, a result that would give them
the power to block future legislation such as the massive $1.5
trillion tax cut package passed late last year. 
    Polls also showed Republicans would likely retain their
majority in the Senate, enabling them to approve U.S. Supreme
Court and other judicial nominations on straight party-line
votes.
    Investors trimmed their bearish bets on longer-dated
Treasuries in advance of the elections as a hedge against the
possibility either Republicans or Democrats could win control of
both chambers of Congress, according to a J.P. Morgan Securities
survey released on Tuesday.
    At 2:40 p.m. EST (1940 GMT), the yield on benchmark 10-year
Treasury notes was up 1.1 basis point at 3.210
percent on moderate volume. It was still below the 7-1/2-year
peak of 3.261 percent reached on Oct. 9 during a dramatic bond
market selloff.
    In addition to the elections and refunding, traders and
investors await clues about the Federal Reserve's view on future
interest rate increases when policymakers meet on Wednesday and
Thursday.
    Fed policymakers are expected to leave the U.S. central
bank's benchmark overnight lending rate unchanged in a range
between 2.00 percent and 2.25 percent at their upcoming meeting,
while the futures market implied they will raise rates for a
fourth time in 2018 at their Dec. 18-19 policy meeting.

November 6 Tuesday 2:41PM New York / 1941 GMT
                               Price                  
 US T BONDS DEC8               137-15/32    -3/32     
 10YR TNotes DEC8              118-16/256   -3/32     
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.32         2.3663    0.002
 Six-month bills               2.455        2.5204    0.005
 Two-year note                 99-230/256   2.928     0.016
 Three-year note               99-162/256   3.0039    0.015
 Five-year note                99-56/256    3.0451    0.019
 Seven-year note               99-46/256    3.1317    0.014
 10-year note                  97-52/256    3.2104    0.011
 30-year bond                  92-16/256    3.4273    -0.004
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       28.00        -0.95     
 30-year vs 5-year yield       38.10        -1.70     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        18.50        -0.75    
 spread                                               
 U.S. 3-year dollar swap        15.50        -1.75    
 spread                                               
 U.S. 5-year dollar swap        13.25        -0.75    
 spread                                               
 U.S. 10-year dollar swap        5.50        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -11.00         0.25    
 spread                                               
 
    

    
 (Reporting by Richard Leong
Editing by Paul Simao and Tom Brown)
  
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