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Funds News

TREASURIES-U.S. yields fall after 30-year auction

 (Adds auction results, updates prices)
    By Chuck Mikolajczak
    NEW YORK, Sept 9 (Reuters) - Longer-dated U.S. Treasury
yields moved lower on Thursday after a strong auction for
30-year Treasury bonds closed out $120 billion in coupon-bearing
supply this week.
    A $24 billion 30-year bond auction was strong, analysts
said, and yields on both the benchmark 10-year and 30-year hit
session lows following its completion. 
    Yields had been trending higher earlier in the day before
reversing course heading into the auction following data on the
labor market and a policy announcement from the European Central
Bank.  
    The Labor Department said weekly initial jobless claims fell
by 35,000 to a seasonally adjusted 310,000, the lowest level in
almost 18 months, and better than the 335,000 forecast.

    The ECB said it would slow its emergency bond purchases
implemented during the COVID-19 pandemic over the coming
quarter, which ECB President Christine Lagarde said was not
tapering, but refrained from detailing how it plans to end its
1.85-trillion-euro Pandemic Emergency Purchase Programme (PEPP).

    "It felt like coming into the morning that we were going to
get maybe closer to 2% if you had to pick a direction you would
have figured we would back up a little bit," said Tom Simons, a
money market economist at Jefferies in New York. 
    "Instead, the market rallied through that period where you
would figure it would build in the concession and now that the
supply is out of the way, the market rallied again." 
    Investors have been focused on the path of the U.S. Federal
Reserve's policy, with several Fed officials recently saying a
slowdown in job growth won't derail the central bank's plan to
cut its own asset purchases this year, even after Friday's
payrolls report missed expectations.
    The yield on 10-year Treasury notes was down 4.3
basis points at 1.297%, after hitting a daily low of 1.287%, its
lowest since Sept. 3. 
    The yield on the 30-year Treasury bond was down
5.4 basis points at 1.898% after falling to 1.885%, its lowest
since Aug. 31. 
    Auctions of 4-week and 8-week bills also went well, analysts
said. Simons said both are reflecting the uncertainty
surrounding the possible expiration of the U.S. debt ceiling and
the lack of clarity as to exactly when Treasury's extraordinary
measures to make more borrowing authority would run out.
    Congressional debate is expected to intensify in the coming
weeks over the debt ceiling issue with the Treasury due to run
out of money sometime in October. Without an extension to the
Treasury's borrowing limits, the risk of a technical default
will weigh on short-term debt. 
    On Wednesday, U.S. Treasury Secretary Janet Yellen again
pressed Congress to address the limit on federal government
borrowing, while U.S. House of Representatives Speaker Nancy
Pelosi said Democrats will not include a provision to raise the
debt ceiling in a $3.5 trillion "reconciliation" spending
measure they aim to pass in the coming months.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on 2- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 108.1 basis points, down from a near
two-month high of 116.4 on Tuesday. 
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 0.4
basis point at 0.214%. 
    
      September 9 Thursday 2:44PM New York / 1844 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0475       0.0482    0.002
 Six-month bills               0.05         0.0507    -0.002
 Two-year note                 99-211/256   0.2144    -0.004
 Three-year note               99-210/256   0.4354    -0.008
 Five-year note                99-212/256   0.7853    -0.021
 Seven-year note               100-80/256   1.0783    -0.033
 10-year note                  99-144/256   1.2971    -0.043
 20-year bond                  98-200/256   1.8232    -0.051
 30-year bond                  102-84/256   1.8977    -0.054
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.25         0.25    
 spread                                               
 U.S. 3-year dollar swap        10.25         0.00    
 spread                                               
 U.S. 5-year dollar swap         9.00         0.00    
 spread                                               
 U.S. 10-year dollar swap        2.50         0.25    
 spread                                               
 U.S. 30-year dollar swap      -25.25         0.50    
 spread (Reporting by Chuck Mikolajczak; editing by Jonathan Oatis)
  
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