December 24, 2019 / 2:33 PM / a month ago

TREASURIES-U.S. yields rise in pre-holiday trade; focus on 5-year note auction

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 24 (Reuters) - U.S. Treasury yields rose on
Tuesday in quiet trading, with investors focused on a five-year
note auction that could disappoint given the thin staffing among
financial firms ahead of the holidays.
    Amid little volume, U.S. two-year yields touched two-week
highs.
   The U.S. Treasury will auction $41 billion in U.S. five-year
notes later on Tuesday. That followed a lackluster two-year note
offering on Monday.
    "For the 5-year, we believe there should be decent demand
above 1.75%," said Justin Lederer, fixed income strategist, at
Cantor Fitzgerald in New York, adding though that five-year
auction results in December have tended to be more volatile. 
    Ahead of the auction, U.S. 5-year note yields
last traded at 1.769%, compared with Monday's 1.754%. 
    "We cannot rule out a concession leading into the auction
close or tail given the lighter staffing ahead of the holiday,
10 a.m. (ET) auction close and year-end with some market
participants stepping aside until 2020," he added.
    Investors tend to sell Treasuries ahead of an auction to
push the yield higher so they can buy them at a lower price, a
move called supply concession.
    In morning trading, U.S. 10-year yields rose to
1.947% from 1.935% late on Monday, while those on U.S. 30-year
bonds were at 2.374%, up from 2.362% on Monday.
    On the short end of the curve, U.S. two-year yields were up
at 1.668%, from Monday's 1.657%, after earlier
hitting a two-week peak of 1.671%.
    The yield curve narrowly steepened on Tuesday, with the
spread between the two-year and 10-year note yields rising as
high as 28.20 basis points. 
    
      December 24 Tuesday 9:22 AM New York/1422 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.555        1.5872    0.002
 Six-month bills               1.57         1.6089    0.003
 Two-year note                 99-234/256   1.6688    0.012
 Three-year note               99-202/256   1.6981    0.014
 Five-year note                98-188/256   1.7692    0.015
 Seven-year note               98-92/256    1.8786    0.013
 10-year note                  98-60/256    1.9471    0.012
 30-year bond                  100          2.3749    0.013
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.00         0.00    
 spread                                               
 U.S. 3-year dollar swap         3.25         0.25    
 spread                                               
 U.S. 5-year dollar swap        -0.50        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -4.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -29.50         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Alex
Richardson)
  
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