October 19, 2017 / 1:52 PM / a year ago

TREASURIES-U.S. 2-year yield pulls back from nine-year peak

    * U.S. 2-year yield retreats from near nine-year high
    * U.S. to sell $5 billion 30-year TIPS at 1 p.m.
    * U.S. jobless claims fall to more than 44-year lows
    * Philly Fed U.S. Mid-Atlantic business index hits 5-month

 (Updates to U.S. morning trading)
    By Richard Leong
    Oct 19 (Reuters) - U.S. Treasury yields fell on Thursday
with the two-year yield scaling back from a near nine-year peak
as some traders booked profits on bearish bond bets tied to
expectations of reduced stimulus from major central banks.
    A retreat in U.S. stock prices from record highs also
revived some appetite for bonds, traders and analysts said.
    "We are seeing a bit of short-covering. We had a pretty
strong upward move in yields in the past month. Stocks have also
pulled back a bit," said Alex Manzara, vice president at R.J.
O'Brien and Associates in Chicago.
    Traders brushed off upbeat data that supported the notion of
steady U.S. economic growth, which would allow the Federal
Reserve to possibly raise interest rates in December.
    The government said first-time filings for jobless benefits
fell to the lowest level since March 1973 last week, while the
Philadelphia Federal Reserve's index on U.S. Mid-Atlantic
business activity unexpectedly reached a five-month high in
    At 9:42 a.m. (1342 GMT), the two-year Treasury note yield
 was down over 2 basis points at 1.539 percent after
reaching 1.571 percent, the highest since October 2008.
    The yield spread between U.S. 2-year government debt and its
German counterpart narrowed to 226 basis points, a
day after hitting its widest since February 2000 on the view
that the European Central Bank is less hawkish than the Fed.
    Benchmark 10-year Treasury yields were down 3
basis points at 2.305 percent, retreating from an one-week high
of 2.352 percent on Wednesday.
    Wall Street stocks opened lower with the S&P 500 off 0.3
    At 1 p.m. (1700 GMT), the government will sell $5 billion of
30-year Treasury Inflation Protected Securities
    Analysts expected decent demand for the latest TIPS supply
despite sluggish domestic inflation.
    Traders also awaited news from U.S. President Trump's
meeting with current Fed Chair Janet Yellen, whose term expires
in February.
    Trump is expected to announce his nominee to head the U.S.
central bank in the coming days.
    Yellen is one of Trump's five possible picks as Fed chief.
Others include his chief economic adviser, Gary Cohn; former Fed
Governor Kevin Warsh; Fed Governor Jerome Powell and Stanford
University economist John Taylor.
October 19 Thursday 9:41AM New York / 1341 GMT
 US T BONDS DEC7               153-28/32    0-27/32   
 10YR TNotes DEC7              125-116/256  0-80/256  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.07         1.0878    -0.007
 Six-month bills               1.2225       1.2471    -0.005
 Two-year note                 99-176/256   1.5386    -0.024
 Three-year note               99-222/256   1.6707    -0.032
 Five-year note                99-162/256   1.9532    -0.034
 Seven-year note               99-210/256   2.1529    -0.035
 10-year note                  99-132/256   2.3052    -0.034
 30-year bond                  98-192/256   2.8121    -0.038
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        24.75         0.25    
 U.S. 3-year dollar swap        22.50         0.50    
 U.S. 5-year dollar swap         8.25         0.00    
 U.S. 10-year dollar swap       -2.50         0.25    
 U.S. 30-year dollar swap      -30.75        -0.25    

 (Reporting by Richard Leong; Editing by Meredith Mazzilli)
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