November 9, 2017 / 8:35 PM / a month ago

TREASURIES-U.S. yields rise as debt supply offsets tax plan concerns

    * U.S. sells $15 bln 30-year bonds to average demand
    * Concerns on tax cuts as Senate bill differs from House
version
    * Stock, junk bond selloff stokes safe-haven bids for
Treasuries
    * U.S. yield curve steepens from flattest level in a decade

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Nov 9 (Reuters) - U.S. Treasury yields rose on
Thursday, with 10-year yields bouncing from near three-week
lows, due to this week's government and corporate debt supply
which was partly offset by concerns about the passage of a
federal tax plan.
    The yield curve steepened from its flattest level in a
decade as Senate Republicans' bill to rewrite the tax code
differed from their House counterpart. This complicated
investors' outlook on whether future government borrowing might
spike higher to finance proposed steep tax cuts.
    The Senate plan, like the House version, would cut the
corporate tax rate to 20 percent from 35 percent, but would
delay this by one year until 2019. 
    Another key difference was that the Senate proposal did not
include a repeal of a critical component of the Affordable Care
Act, or Obamacare, which the House bill contains.
    "It looks like the passage of a tax bill would be lengthy
and may end up being a disappointment," said Bruno Braizinha,
interest rate strategist at Societe Generale in New York.
    Growing concerns about tax cuts and other changes, which
investors have been counting on to boost company profits and
economic growth, have spurred selling in stocks, junk bonds and
other risky assets, while kindling some safe-haven demand for
Treasuries.
    The 10-year Treasury yield traded at 2.333
percent, up over 1 basis point from Wednesday when it hit a near
three-week trough of 2.304 percent, while the two-year yield
 dipped 1 basis point to 1.633 percent.  
    The yield spread between two-year and 10-year Treasuries
 hit a fresh decade-tight level of 65.9 basis points
earlier on Thursday, before steepening to 69.8 basis points,
Reuters data showed.
    Traders have favored longer-dated Treasuries over
shorter-dated issues over the past couple of weeks, on the
uncertainty about a tax overhaul and a diminished likelihood of
an introduction of a Treasury bond that matures beyond 30 years.
    Expectations of further rate increases from the Federal
Reserve and domestic inflation remaining below the Fed's 2
percent goal have made "curve-flattener" trades more appealing,
analysts said.
    The curve-flattening move made longer-dated Treasuries
expensive, reducing their appeal at this week's government bond
auctions, which were part of the November refunding.
    Thursday's $15 billion 30-year Treasury bond sale fetched
average demand, similar to the results at a $23 billion 10-year
note auction the day before.
    Companies issued $34 billion in investment-grade debt from
Monday through Wednesday with another 13 deals set for sale on
Thursday, according to IFR, a Thomson Reuters unit.

  November 9 Thursday 3:22PM New York / 2022 GMT
                               Price                  
 US T BONDS DEC7               153-29/32    -0-14/32  
 10YR TNotes DEC7              125-56/256   -0-8/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.2125       1.2331    0.008
 Six-month bills               1.325        1.3524    0.010
 Two-year note                 99-190/256   1.6333    -0.012
 Three-year note               99-252/256   1.7554    -0.008
 Five-year note                99-252/256   2.0033    0.001
 Seven-year note               100-88/256   2.1965    0.008
 10-year note                  99-76/256    2.3292    0.012
 30-year bond                  98-220/256   2.8067    0.023
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       69.40        0.90      
 30-year vs 5-year yield       80.30        2.35      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.75         0.25    
 spread                                               
 U.S. 3-year dollar swap        18.00         0.50    
 spread                                               
 U.S. 5-year dollar swap         6.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.00         1.00    
 spread                                               
 U.S. 30-year dollar swap      -26.75        -0.25    
 spread                                               
 
    

    
 (Reporting by Richard Leong, Editing by Rosalba O'Brien and
Chizu Nomiyama)
  

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