October 19, 2017 / 8:38 PM / a year ago

TREASURIES-U.S. yields fall on stocks, report on Fed chair pick

    * Trump said leaning toward Powell as next Fed chief -
    * U.S. 2-year yield retreats from near nine-year high
    * Trump meets Yellen as part of Fed chief selection process
    * U.S. sells $5 billion 30-year TIPS to solid demand

 (Updates market action after Politico story on Powell)
    By Richard Leong
    NEW YORK, Oct 19 (Reuters) - U.S. Treasury yields fell on
Thursday as U.S. stock prices stalled near record highs and on a
report U.S. President Donald Trump is leaning to nominate
someone who is seen unlikely to change the Federal Reserve's
current easy policy stance.
    The two-year yield also scaled back from a near nine-year
peak as some traders booked profits on bearish bond bets tied to
expectations of reduced stimulus from major central banks.
    "We are seeing a bit of short-covering. We had a pretty
strong upward move in yields in the past month. Stocks have also
pulled back a bit," said Alex Manzara, vice president at R.J.
O'Brien and Associates in Chicago.
    The drop in yield was limited as Wall Street equity prices
ended flat, paring earlier losses, and as traders speculated on
Trump's possible picks for Fed chief: current Fed Chair Janet
Yellen; his chief economic adviser, Gary Cohn; former Fed
Governor Kevin Warsh; current Fed Governor Jerome Powell and
Stanford University economist John Taylor. 
    Trump met on Thursday with Yellen, whose term expires in
February. He is expected to announce his nominee in the coming
    "The sooner we see (a decision) the better. It would take
another uncertainty out of the market," said Mary Ann Hurley,
vice president of fixed income at D.A. Davidson in Seattle.
    In late trading, Politico, citing three administration
officials, reported Trump showed preference for Powell as the
next Fed chair.
    Powell is seen likely to stick with the Fed's gradual rate
hike path and to loosen financial regulations, according to
traders and analysts. 
    Traders brushed off upbeat data that supported the notion of
steady U.S. economic growth, which would allow the Fed to
possibly raise rates in December.
    The government said first-time filings for jobless benefits
fell to the lowest since March 1973 last week, while the
Philadelphia Federal Reserve's index of U.S. Mid-Atlantic
business activity unexpectedly reached a five-month high in
    The two-year Treasury note yield was down 2.4
basis points at 1.539 percent after reaching 1.571 percent, the
highest since October 2008, Reuters data showed.
    Benchmark 10-year Treasury yields were down 2
basis points at 2.316 percent, retreating from a one-week high
of 2.352 percent on Wednesday.
    Wall Street stocks recovered much of their early losses on
weaker technology shares. U.S. stocks closed flat on Thursday,
coming back from sharp losses after the open.
    On the supply front, the government sold $5 billion of
30-year Treasury Inflation Protected Securities to solid demand
October 19 Thursday 4:31PM New York / 2031 GMT
 US T BONDS DEC7               153-14/32    0-13/32   
 10YR TNotes DEC7              125-88/256   0-52/256  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.075        1.0929    -0.002
 Six-month bills               1.2325       1.2574    0.005
 Two-year note                 99-176/256   1.5386    -0.024
 Three-year note               99-224/256   1.6681    -0.035
 Five-year note                99-160/256   1.9548    -0.032
 Seven-year note               99-192/256   2.1639    -0.024
 10-year note                  99-104/256   2.3178    -0.021
 30-year bond                  98-68/256    2.8365    -0.013
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        24.00        -0.50    
 U.S. 3-year dollar swap        22.25         0.25    
 U.S. 5-year dollar swap         8.25         0.00    
 U.S. 10-year dollar swap       -2.25         0.50    
 U.S. 30-year dollar swap      -30.25         0.25    
 (Reporting by Richard Leong; Editing by Meredith Mazzilli and
James Dalgleish)
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