October 9, 2018 / 2:09 PM / 11 days ago

TREASURIES-U.S. long-dated yields dip from multi-year highs

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 9 (Reuters) - U.S. long-dated Treasury yields
slipped from multi-year highs in choppy trading on Tuesday, as
investors took a breather from selling bonds in recent moves
that many feel have gone too far, too fast.
    The bond market was closed on Monday for the Columbus Day
holiday.
    Benchmark U.S. 10-year yields earlier touched a 7-1/2-year
peak, while those on 30-year bonds hit a more than four-year
high. Yields on 7-year notes rose as well, climbing to their
highest in more than eight years.
    Upbeat U.S. economic data as well as hawkish remarks from
Federal Reserve officials that boosted expectations of interest
rate hikes until 2020, had propelled yields to lofty levels. 
    The surge in yields, however, took a step back on Tuesday.
    "We have been short since the middle of August and it worked
out okay so far. But this week, we're kind of trying to take a
step back," said Subadra Rajappa, head of U.S. rates strategy,
at Societe Generale in New York.
    "We will probably take a little bit of a pause here and see
how things progress. Things have moved too fast, too quickly. We
think the 10-year yield is going to trade between 3.00 to 3.25
percent," she added.
    Federal Reserve Bank of Dallas President Robert Kaplan also
expressed concern about the jump on U.S. yields, noting on
Tuesday that the move suggests there is uncertainty among
investors over future economic growth prospects.
    The 10-year Treasury yield, which reached a fresh multi-year
high on Tuesday, is "telling me that prospects for future U.S.
growth are somewhat sluggish (and) that outward growth is
looking a little more uncertain," he said at the Economic Club
of New York. 
    His remarks weighed slightly on yields. Kaplan, though, is
not a voting member this year.
    In morning trading, U.S. 10-year yields were last at 3.221
percent, down from 3.227 percent late on Friday.
Earlier in the session, 10-year yields hit 3.261 percent, the
highest since early May 2011.
    U.S. 30-year yields were at 3.393 percent, after
earlier rising to 3.446 percent, its strongest since July 2014.
Last Friday, the 30-year yield was at 3.397 percent.
    U.S. 7-year yields also rose earlier in the session, hitting
3.199 percent, its highest in 8-1/2 years. It was last at 3.163
percent.
    On the short-end of the curve, U.S. 2-year yields were
slightly down at 2.885 percent, from Friday's 2.889
percent.
    Investors will monitor a slew of global risks, including
this week's slate of heavy supply with $230 billion in bills and
notes on offer.
    
      October 9 Tuesday 9:55AM New York / 1355 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.18         2.2217    0.005
 Six-month bills               2.355        2.4155    0.000
 Two-year note                 99-190/256   2.8851    -0.004
 Three-year note               99-94/256    2.9766    -0.008
 Five-year note                99-34/256    3.0642    -0.007
 Seven-year note               98-252/256   3.1634    -0.008
 10-year note                  97-24/256    3.2215    -0.006
 30-year bond                  92-168/256   3.3931    -0.004
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        18.50         1.00    
 spread                                               
 U.S. 3-year dollar swap        16.75         1.00    
 spread                                               
 U.S. 5-year dollar swap        12.00         0.75    
 spread                                               
 U.S. 10-year dollar swap        4.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -11.00         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette
Baum)
  
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