April 13, 2018 / 2:01 PM / in 3 months

TREASURIES-U.S. yield curve hovers near decade low

    * Fed's Rosengren sees perhaps three more rate hikes in 2018
    * JOLTS, U. Michigan consumer sentiment data on tap

    By Richard Leong
    NEW YORK, April 13 (Reuters) - The U.S. Treasury yield curve
hovered at its lowest level in more than decade on Friday as
short-dated yields have risen more than longer-dated ones this
week on expectations of further interest rate increases from the
Federal Reserve.
    Minutes from the U.S. central bank's policy meeting last
month, which were released on Wednesday, showed most Fed
officials were confident inflation is moving toward their
desired 2-percent goal as the economy improves.
    Boston Federal Reserve President Eric Rosengren said Friday
the central bank will probably need to raise interest rates
three more times in 2018 in response to a robust economy,
following a quarter-point rate hike in March. 
    "The Fed  appears  to  be  set  to  keep  pressure  firmly 
on  the  front  end," Wells Fargo Securities strategists wrote
in a research note, adding they expected the spread between
two-year and 10-year yields to shrink to 20 to 25 basis points
by year-end.
    Some analysts said the curve yield may end up inverting if
the curve flattens further. When shorter-dated yields rise above
longer-dated ones, this market phenomenon has been a reliable
gauge of a U.S. recession.
    "If that (a curve inversion) happens, investors should take
the curve very seriously and ignore the Fed’s skepticism," Citi
analyst Ruslan Bikbov wrote in a note earlier this week.
    At 9:44 a.m. (1344 GMT), the yield gap on two-year and
10-year Treasuries flattened 1 basis points to
48.20 basis points. It had hit 45.7 basis points on Wednesday,
which was the flattest since September 2007, according to
Reuters data.
    Long-dated yields, in the meantime, notched higher on this
week's Treasury supply, although the rise has been capped by
safe-haven demand on worries about a U.S. strike against Syria.

    The U.S. Treasury sold a combined $64 billion worth of
three-year, 10-year and 30-year securities to fair demand this
week. 
    Overall yield levels were marginally higher with Wall Street
stocks expected to open higher following a profit surge at
JPMorgan, the biggest U.S. bank by assets, as the
quarter earnings season begins.
    The yield on 10-year Treasury notes was up 0.9
basis points to 2.843 percent. 
    Two-year Treasury note yield was up 0.9 basis
points to 2.365 percent.
    On the data front, the government will release (1400 GMT)
"JOLTS" data on job openings for February at 10 a.m. They
reached a record high in January.
    At the same time, the University of Michigan will put out
its reading on U.S. consumer sentiment in early April, which is
forecast to retreat from a 14-year peak set in March. 
April 13 Friday 9:43AM New York / 1343 GMT
                               Price                   
 US T BONDS JUN8               145-7/32     -0-5/32    
 10YR TNotes JUN8              120-104/256  -0-16/256  
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             1.7225       1.7537     0.008
 Six-month bills               1.91         1.955      0.005
 Two-year note                 99-200/256   2.3648     0.017
 Three-year note               99-156/256   2.5111     0.016
 Five-year note                99-40/256    2.6828     0.012
 Seven-year note               98-244/256   2.7915     0.011
 10-year note                  99-52/256    2.8432     0.009
 30-year bond                  99-32/256    3.0447     0.005
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        31.50        -0.50     
 spread                                                
 U.S. 3-year dollar swap        25.00        -0.50     
 spread                                                
 U.S. 5-year dollar swap        13.25         0.00     
 spread                                                
 U.S. 10-year dollar swap        3.50        -0.25     
 spread                                                
 U.S. 30-year dollar swap      -13.00        -0.25     
 spread                                                
 
    

    
 (Reporting by Richard Leong
Editing by Nick Zieminski)
  
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