May 30, 2018 / 1:12 PM / in 21 days

TREASURIES -U.S. yields rise after Tuesday's steep fall

 (Recasts, adds comment, details, byline, table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 30 (Reuters) - U.S. Treasury yields rose on
Wednesday, reversing losses the previous session fueled by the
Italian political crisis and in line with gains in Europe, as
global equities stabilized and investors decided Tuesday's moves
were a little overdone.
    U.S. benchmark 10-year Treasury yields on Tuesday had posted
their largest one-day drop in nearly two years, while those on
two-year notes had their largest one-day drop in more than nine
years.
    On Wednesday, these losses have all been unwound.
    "This was a significant reversal," said Justine Lederer,
Treasury analyst at Cantor Fitzgerald in New York. "I just think
the moves yesterday based on Italy were a little overdone." 
    On Wednesday, Italy searched for a last-minute exit from
almost three months of political turmoil, with its biggest party
looking to make a renewed attempt to form a coalition government
with the right-wing League.
    Yields, meanwhile, slightly pared gains after Wednesday's
U.S. data showing a slight miss in expectations with the private
sector payrolls report and the second estimate for gross
domestic product. 
    A report by U.S. payrolls processor ADP showed that a total
of 178,000 jobs were created this month, lower than expectations
for gains of 190,000. In addition, the April payrolls were
revised down to 163,000 from the original estimate of 204,000
jobs.
    "There has never been a strong correlation between the ADP
report and the non-farm payrolls, so I don't think the market is
really paying attention to that," said Lederer.
    Meanwhile, U.S. economic growth slowed slightly more than
initially thought in the first quarter amid downward revisions
to inventory investment and consumer spending, but income tax
cuts are likely to boost activity this year.
    But the data did not have much impact on the Treasury
market.
    In morning trading, U.S. 10-year yields rose to 2.844
percent, from Tuesday's 2.768 percent.
    U.S. 30-year yields were last at 3.030 percent,
from 2.967 percent late on Tuesday.
    On the short-end of the curve, U.S. 2-year yields last
traded at 2.383 percent, from Tuesday's 2.319
percent.
    
    May 30 Wednesday 9:04AM New York / 1304 GMT
                               Price                  
 US T BONDS JUN8               145-5/32     -1-3/32   
 10YR TNotes JUN8              120-160/256  -0-156/2  
                                            56        
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.8975       1.9331    0.047
 Six-month bills               2.0325       2.0821    0.057
 Two-year note                 100-60/256   2.3793    0.060
 Three-year note               100-90/256   2.5007    0.080
 Five-year note                100-108/256  2.6593    0.083
 Seven-year note               100-142/256  2.7872    0.085
 10-year note                  100-68/256   2.8441    0.076
 30-year bond                  101-220/256  3.0301    0.063
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        24.50         0.00    
 spread                                               
 U.S. 3-year dollar swap        19.50        -1.00    
 spread                                               
 U.S. 5-year dollar swap        11.00        -0.75    
 spread                                               
 U.S. 10-year dollar swap        3.25        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -11.25         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Chizu Nomiyama and Nick Zieminski)
  
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