March 11, 2019 / 7:17 PM / 5 months ago

TREASURIES-U.S. yields up as risk appetite rises; focus on more supply

    * U.S. 3-year note auction shows fair demand
    * U.S. retail sales for January rise unexpectedly 
    * U.S. data suggests Fed will not hike in 2019 - analyst

 (Updates prices, adds comment, U.S. auction results)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 11 (Reuters) - U.S. Treasury yields rose on
Monday after falling for four straight sessions, as overall risk
appetite improved and equity markets stabilized, with investors
bracing for this week's slate of corporate supply and government
debt auctions.
    The $38 billion U.S. three-year note auction showed fair
demand on Monday, with the yield of 2.448 percent coming in
slightly higher than that at the bid deadline.
    The bid-to-cover ratio, an indication of demand, was 2.55,
below the 2.66 average. Indirect bidders, however, which
includes foreign central banks, took down 49.5 percent of
supply, higher than the 45.7 percent takedown at the previous
auction and the 46.4 percent average.
    Investors typically sell Treasuries ahead of an auction to
push the yield higher so they can buy them at a lower price.
    "Rates are not going up much anytime soon," said Jim Caron,
portfolio manager at Morgan Stanley Investment Management in New
York. "I don't see a reason that this round of supply will be a
problem." 
    After the three-year note, the Treasury is set to auction
$24 billion in 10-year notes on Tuesday, and $16 billion in
30-year bonds on Wednesday.
    On the corporate debt side, four U.S. investment-grade deals
were announced on Monday, led by BB&T Bank, natural gas company
ONEOK, diversified holding company RELX Capital and Dominion
Energy.  
    Ahead of corporate supply, bond managers tend to hedge
against large interest rate moves by selling U.S. government
debt. 
    Overall, risk appetite has improved amid gains on Wall
Street led by technology stocks, and that has weighed on
Treasuries, said Gennadiy Goldberg, interest rates strategist at
TD Securities in New York.
    In afternoon trading, U.S. 10-year note yields rose to 2.644
percent, up from 2.625 percent late on Friday.
    U.S. 30-year bond yields were also up at 3.033 percent
, from 3.009 percent on Friday.
    On the short end of the curve, U.S. 2-year yields climbed as
well to 2.479 percent, compared with Friday's 2.463 percent
.
    After Monday's auction, U.S. three-year notes were at 2.452
percent, up from 2.433 percent on Friday.
    Data showing U.S. retail sales unexpectedly rising 0.2
percent in January had little impact on Treasuries, as it was
offset by a downward revision in December sales to show a 1.6
percent drop instead of the previously reported 1.2 percent
fall.
    But, following a weak U.S. nonfarm payrolls report on
Friday, the retail sales data reinforced expectations the
Federal Reserve will not raise interest rates at all this year,
said Andrew Hunter, senior U.S. economist at Capital Economics
in London.

   Monday, March 11, at 1506 EDT (1906 GMT):
                               Price        Current   Net
                                            Yield     Change
                                            (pct)     (bps)
 Three-month bills             2.39         2.4371    -0.017
 Six-month bills               2.455        2.5264    0.002
 Two-year note                 100-11/256   2.4772    0.014
 Three-year note               100-34/256   2.4524    0.019
 Five-year note                99-178/256   2.4404    0.015
 Seven-year note               99-208/256   2.5294    0.012
 10-year note                  99-220/256   2.6411    0.016
 30-year bond                  99-112/256   3.0286    0.020
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        12.50         0.75    
 spread                                               
 U.S. 3-year dollar swap         8.75         0.25    
 spread                                               
 U.S. 5-year dollar swap         7.25         0.00    
 spread                                               
 U.S. 10-year dollar swap        1.75         0.00    
 spread                                               
 U.S. 30-year dollar swap      -20.00         0.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Richard Leong; Editing by Paul Simao and Jonathan Oatis)
  
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