June 8, 2018 / 2:02 PM / 2 months ago

TREASURIES-U.S. yields flat as trade worries keep traders on edge

    * Trump lashes out at trade partners ahead of G7 summit
    * Traders also cautious before Fed, ECB meetings
    * U.S. to sell $68 bln coupon-bearing debt next week

    By Richard Leong
    NEW YORK, June 8 (Reuters) - U.S. Treasury yields were
little changed on Friday as traders await for outcome of the
Group of Seven summit, fretting about the growing trade tension
between the United States and its major allies on global
economic growth.
    U.S. President Donald Trump on Friday lashed out at Canada
and the European Union before the G7 meeting in Charlevoix,
Quebec, after he imposed tariffs last week on steel and aluminum
imports from Canada, Mexico and the European Union. Those
countries' leaders criticized Trump's move and said they plan to
retaliate with their own levies on U.S. products.
    As trade tension escalates, bond traders are also on edge
ahead of next week's $66 billion coupon-bearing supply and
possible signals on monetary policy coming out of the meetings
of Federal Reserve and European Central Bank policy-makers.
    Traders are also wary in advance of Trump's meeting with
North Korean leader Kim Jong Un in Singapore about Pyongyang's
nuclear weapons.
    "There are so many questions out there," said Thomas Roth,
head of Treasury trading at MUFG Securities America in New York.
"There's nervousness about the G7 summit and Trump's North Korea
meeting."
    At 9:38 a.m. (1338 GMT), the yield on benchmark 10-year
Treasury notes was 2.930 percent, down 0.3 basis
point from late on Thursday. 
    The 10-year yield has a roller-coaster two weeks. It was on
track to increase about 4 basis points this week, reversing last
week's drop and a seven-week low tied to fears about political
turmoil in Italy.
    Investors are also awaiting about the outcome of the
European Central Bank's debate on Thursday about ending the
expansion of its 2.55 trillion-euro ($3 trillion) bond purchase
program in September.
    Traders waited for the U.S. Federal Reserve to signal how
many times it would raise interest rates for the rest of 2018 as
domestic labor conditions tighten and inflation moves closer to
its 2 percent goal.    
    They widely expect the Fed to raise key overnight borrowing
costs by a quarter point to a 1.75 percent to 2.00 percent range
next Wednesday.
    On the supply front, the U.S. Treasury Department planned to
sell a combined $68 billion in three-year, 10-year and 30-year
securities next week.      
    This week's heavy supply of higher-yielding corporate bonds
has helped push up Treasury yields, analysts said.
    Companies have raised about $36.8 billion in the
investment-grade bond market this week, according to IFR, a unit
of Thomson Reuters.
June 8 Friday 9:40AM New York / 1340 GMT
                               Price                  
 US T BONDS SEP8               143-9/32     0/32      
 10YR TNotes SEP8              119-164/256  2/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.895        1.9302    0.000
 Six-month bills               2.0625       2.1127    -0.005
 Two-year note                 100          2.4998    -0.004
 Three-year note               99-254/256   2.6274    -0.006
 Five-year note                99-230/256   2.7719    -0.005
 Seven-year note               99-250/256   2.8786    -0.006
 10-year note                  99-136/256   2.9296    -0.003
 30-year bond                  100-232/256  3.0784    -0.002
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       42.80        -0.20     
 30-year vs 5-year yield       30.60        0.30      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        27.00        -1.25    
 spread                                               
 U.S. 3-year dollar swap        22.25        -1.25    
 spread                                               
 U.S. 5-year dollar swap        13.75        -0.25    
 spread                                               
 U.S. 10-year dollar swap        5.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap       -7.25         0.25    
 spread                                               
 

    
 (Reporting by Richard Leong
Editing by Nick Zieminski)
  
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