January 25, 2019 / 8:14 PM / a month ago

TREASURIES-U.S. bond yields rise as Wall Street stocks rally

    * U.S. stock prices rise on upbeat company earnings
    * Trump says he has reached deal to end government shutdown
    * U.S. to sell $113 bln in fixed-rate debt next week
    * Traders await Fed policy meeting, U.S. jobs data  

 (Updates market action, adds graphic)
    By Richard Leong
    NEW YORK, Jan 25 (Reuters) - U.S. Treasury yields rose on
Friday, with 10-year yields bouncing from a one-week low, as
Wall Street stocks climbed on upbeat company results, offsetting
worries about slowing economic growth and the U.S.-China trade
conflict.
    A looming supply of Treasuries next week together with
caution ahead of the Federal Reserve's policy meeting and the
government's payrolls report added upward pressure on bond
yields.
    Concerns about the government shutdown's impact on the
economy simmered down after U.S. President Donald Trump said a
deal had been reached with lawmakers that would reopen the
government  through Feb. 15.
    "The market is getting its cue from the equity market," said
Subadra Rajappa, head of U.S. rates strategy at SG Corporate &
Investment Banking in New York.
    The yield on benchmark 10-year Treasury notes
was 4.3 basis points higher at 2.755 percent. It hit a one-week
low of 2.700 percent on Thursday.
    Two-year Treasury yields, which are particularly
sensitive to traders' views on Fed policy, were up 4.2 basis
points at 2.604 percent.
    The S&P 500 was up 0.9 percent, while the Dow
was 0.8 percent higher and the Nasdaq rose 1.3 percent.
    Despite worries about trade and growth, longer-dated
Treasuries are expensive as more supply is expected to fund the
tax cut enacted in December 2016 and the federal spending deal
reached last February, said Jerry Paul, senior vice president of
fixed income at ICON Advisers in Denver.
    "I would be cautious about 10-year Treasuries. We have an
awful lot of issuance to come," Paul said.
    The Treasury Department will sell a combined $113 billion in
two-year, five-year and seven-year fixed-rate securities, the
same amount it auctioned in December.
    It also will sell $20 billion in two-year floating-rate
notes next week, up from $18 billion auctioned last month.

    Traders also await possible hints from the Federal Reserve
on the timing of the next rate hike after policy-makers meet
next Tuesday and Wednesday.
    Interest rates futures implied traders expected about a 30
percent chance the Fed would raise key lending rates by the end
of 2019, up from 22 percent late on Thursday, according to CME
Group's FedWatch program.
    While recent data signaled a slowing in business and housing
activities, the U.S. labor market has stayed strong with jobless
claims falling to its lowest level in over 49 years last week.

    The Labor Department will release its payrolls report for
January next Friday at 8:30 a.m. (1330 GMT). 
January 25 Friday 3:02PM New York / 2002 GMT
                               Price                  
 US T BONDS MAR9               145-2/32     -23/32    
 10YR TNotes MAR9              121-96/256   -12/32    
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.3375       2.3834    0.014
 Six-month bills               2.445        2.5093    0.002
 Two-year note                 99-206/256   2.6042    0.042
 Three-year note               99-196/256   2.5825    0.049
 Five-year note                100-36/256   2.5942    0.049
 Seven-year note               99-192/256   2.6646    0.050
 10-year note                  103-40/256   2.7549    0.043
 30-year bond                  106-20/256   3.0624    0.029
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       14.90        -0.15     
 30-year vs 5-year yield       46.80        -1.45     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        14.00        -1.00    
 spread                                               
 U.S. 3-year dollar swap        11.00        -0.75    
 spread                                               
 U.S. 5-year dollar swap         8.00        -0.25    
 spread                                               
 U.S. 10-year dollar swap        3.00         0.00    
 spread                                               
 U.S. 30-year dollar swap      -17.50         0.00    
 spread                                               
 

    
 (Reporting by Richard Leong; Editing by Meredith Mazzilli and
Chizu Nomiyama)
  
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