December 21, 2017 / 3:17 PM / 9 months ago

TREASURIES-U.S. bond yields retreat as market selloff fades

    * U.S. yield curve flattens a tad after sharp steepening
    * GDP, jobless claims data suggest steady U.S. growth
    * U.S. to sell $14 bln 5-year TIPS at 1 p.m.
    * U.S. bond market to close early on Friday before Christmas

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Dec 21 (Reuters) - U.S. Treasury yields fell on
Thursday with 10-year yields scaling back from a nine-month peak
as bargain-minded investors emerged, providing a respite from a
sharp three-day bond market selloff tied to a sweeping U.S. tax
bill.
    The most dramatic overhaul of the U.S. tax code in 30 years,
which Congress approved on Wednesday, had stoked a bond market
selloff the previous three days as traders expected the proposed
tax cuts to corporations and wealthy individuals would boost
economic growth and pile on at least $1 trillion to the national
debt in 10 years.
    That view of faster growth and higher federal debt load hit
longer-dated bonds especially hard, steepening the yield curve
that had reached its flattest level in a decade this week.
    "The downward pressure on long-end yields has been taken off
with the passage of the tax bill," said Larry Milstein, head of
government and agency trading at R.W. Pressprich & Co in New
York. "People are nibbling a bit here," he said of Thursday's
mild bargain hunting.
    At 9:56 a.m. (1456 GMT) the 10-year Treasury yield
 was 2.493 percent, down marginally from late on
Wednesday after touching 2.504 percent earlier on Thursday.
    The five-year to 30-year part of the yield curve
 flattened 2 basis points to 61.9 basis points. It
hit 51.9 basis points on Monday which was the flattest level
since October 2007, Reuters and Tradeweb data showed.
    With the major U.S. tax legislation likely enacted into law
as soon as President Donald Trump signs it, investors are left
to interpret a batch of economic data and determine the strength
of business and consumer activities before the tax changes go
into effect, analysts said.
    On Thursday, the government said the U.S. economy in the
third quarter grew at a 3.2 percent annualized pace, its
briskest in more than two years. The figure was slower than a
prior estimate of 3.3 percent.
    Domestic weekly jobless claims rose to 245,000 last week but
still suggested a firm labor market. 
    On the supply front, the government will sell $14 billion of
five-year Treasury Inflation Protected Securities
 at 1 p.m. (1800 GMT).
    Trading volume has been relatively light this week as some
traders and investors already left for the Christmas holiday.
    The U.S. bond market will close early at 2 p.m. (1900 GMT)
on Friday and stay shut on Monday. Many European markets will
remain closed next Tuesday.
December 21 Thursday 9:57AM New York / 1457 GMT
                               Price                  
 US T BONDS MAR8               150-22/32    0-4/32    
 10YR TNotes MAR8              123-120/256  0-4/256   
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.3575       1.381     -0.003
 Six-month bills               1.49         1.5221    0.002
 Two-year note                 99-198/256   1.8693    0.008
 Three-year note               99-170/256   1.9916    0.003
 Five-year note                98-222/256   2.2434    0.001
 Seven-year note               98-64/256    2.4002    0.000
 10-year note                  97-224/256   2.4935    -0.003
 30-year bond                  97-180/256   2.8648    -0.010
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       62.30        -1.35     
 30-year vs 5-year yield       62.10        -1.80     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        21.25         0.50    
 spread                                               
 U.S. 3-year dollar swap        19.00         1.25    
 spread                                               
 U.S. 5-year dollar swap         4.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -1.75         0.75    
 spread                                               
 U.S. 30-year dollar swap      -21.50         1.00    
 spread                                               
 

       

    
 (Reporting by Richard Leong; Editing by Susan Thomas and Phil
Berlowitz)
  
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