September 13, 2017 / 3:11 PM / 10 months ago

TREASURIES-U.S. bond yields rise on federal, corporate supply

    * U.S. to sell $12 bln 30-year bond supply at 1 p.m. (1700
    * Companies have raised $26 bln in corporate bond market
    * U.S. August producer price data support benign inflation

    By Richard Leong
    NEW YORK, Sept 13 (Reuters) - U.S. Treasury yields rose on
Wednesday with 10-year yield hitting a 2-1/2 week high as
investors reduced their bond holdings to make room for this
week's government and corporate debt supply.
    A powerful rebound in stock prices around the world with
Wall Street's major indexes setting record highs on Tuesday also
underpinned the bounce in bond yields, analysts said.
    Investors unloaded equities and other risky assets last week
on concern about the potential for massive damage from Hurricane
Irma and tension between North Korea and the United States and
its allies over Pyongyang's nuclear weapons program.

    Safe-haven buying of Treasuries knocked the benchmark
10-year yield to a 10-month low, just above 2 percent on Friday
before turning higher this week on reduced tension between
Washington and Pyongyang and early signs that destruction from
Irma in the United States is not as devastating as some had
    "The bond market is comfortable in a 2.10-2.30 percent
range. We need new stresses to push it out of that range," said
Matt Toms, chief investment officer of fixed income at Voya
Investment Management in Atlanta.
    At 11:00 a.m. (1500 GMT), the 10-year yield was
2.179 percent, up almost 1 basis point from late on Tuesday and
just marginally below a 2-1/2 week peak.
    The 30-year bond yield hovered near a three-week
peak at 2.778 percent in advance of a $12 billion auction of
long bond supply at 1 p.m. (1700 GMT).
    The latest 30-year supply was the final leg of this week's
$56 billion in coupon-bearing Treasuries supply. It followed
softly bid auctions of three-year and 10-year debt.
    In "when-issue" activity, traders expected the latest
30-year supply to sell at a yield of 2.778 percent
, which would be the lowest since October,
Tradeweb data showed.
    In the corporate sector, companies have raised about $26
billion through the sales of investment-grade and high-yield
debt this week, according to IFR, a Thomson Reuters unit.

    On the data front, domestic producer prices grew 0.2 percent
in August, less than the 0.3 percent increase forecast among
analysts polled by Reuters.
    This latest reading reinforced the view that domestic
inflation would remain below the Federal Reserve's 2-percent
goal longer than previously thought.
    This benign inflation outlook should help hold down
long-term bond yields, analysts said. 
    "There is a lack of fear of inflation in the bond market.
There's no credible case for inflation to increase," Toms said.
  September 13 Wednesday 11:00 AM New York / 1500 GMT
 US T BONDS DEC7               155-5/32     -0-3/32   
 10YR TNotes DEC7              126-140/256  -0-24/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.03         1.047     0.003
 Six-month bills               1.1475       1.1702    0.007
 Two-year note                 99-206/256   1.3512    0.016
 Three-year note               99-176/256   1.4819    0.016
 Five-year note                99-88/256    1.7637    0.017
 Seven-year note               99-48/256    2.0006    0.009
 10-year note                  100-160/256  2.1795    0.009
 30-year bond                  99-120/256   2.7762    0.001
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        23.50         0.25    
 U.S. 3-year dollar swap        19.75         0.50    
 U.S. 5-year dollar swap         7.25         0.50    
 U.S. 10-year dollar swap       -4.50         0.75    
 U.S. 30-year dollar swap      -34.50         1.00    

 (Reporting by Richard Leong)
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