March 13, 2019 / 3:11 PM / 5 months ago

TREASURIES-Yields advance as risk appetite improves, ahead of supply

    * U.S. producer prices data showed tame reading
    * Market participants shrugging of Brexit for now
    * Focus on U.S. $30-year bond auction

 (Recasts, adds comment, Treasuries table, byline, updates
prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 13 (Reuters) - U.S. Treasury yields rose on
Wednesday, after falling the previous session, as risk appetite
improved and equity markets steadied, although trading is likely
to be rangebound due to a deepening political crisis in Britain
over its plan to leave the European Union.
    U.S. producer prices remained subdued in February,
Wednesday's data showed, a day after consumer prices showed a
soft reading. Both reports reinforced expectations the Federal
Reserve will hold interest rates steady throughout the year
after raising them four times in 2018. 
    "After yesterday's CPI (consumer price index) data, yields
fell. So some of these are just rebound after that," said Stan
Shipley, fixed income strategist, at Evercore ISI in New York.
    He also cited the British parliaments rejection of Prime
Minister Theresa May's revised deal to leave the European Union
as one of the reasons for the fall in yields on Tuesday.
    Shipley said, however, that in the midst of Brexit, the U.S.
economy has slowed, but is not in terrible shape.
    "The Brits are going to do what they're going to do and in
the meantime, we just have to move on from it," Shipley added.
    In late morning trading, U.S. 10-year note yields rose to
2.614 percent from 2.605 percent late on Tuesday.
    U.S. 30-year bond yields were up at 3.003 percent
 from 2.99 percent on Tuesday.
    Yields on both 10-year notes and 30-year bonds have fallen
in six of the last eight sessions.
    On the short end of the curve, U.S. 2-year yields were up
slightly at 2.458 percent, compared with Tuesday's 2.453 percent
.
    Data showed on Wednesday that U.S. producer prices rose just
1.9 percent in the 12 months through February, the smallest
increase since June 2017. That offset a report showing new
orders for U.S.-made capital goods in January posted their
largest increase in six months.
    The Commerce Department said orders for non-defense capital
goods excluding aircraft, a closely watched proxy for business
spending plans, rebounded 0.8 percent, the biggest gain since
July.
    The reports had minimal impact on Treasuries overall.
    Investors are now bracing for the $16 billion auction of
U.S. 30-year bonds later on Wednesday after a solid takedown of
the Treasury's $10 billion note sale on Tuesday.
    Wednesday's price action suggested some concession going
into the 30-year auction, with investors selling Treasuries so
they can buy the bonds at lower prices later.
    "Even with 30-year yields near the lower bound of this
year's range and with several (Federal Reserve Open
Market)Committee members already expressing their view that we
are at neutral rates, a 3 percent yield will attract buyers,"
said BMO Capital Markets in a note.
    
      March 13 Wednesday 10:43 AM New York / 1443 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.4025       2.4508    -0.009
 Six-month bills               2.4525       2.5178    -0.014
 Two-year note                 100-20/256   2.4587    0.006
 Three-year note               99-224/256   2.4184    0.005
 Five-year note                99-202/256   2.4203    0.006
 Seven-year note               99-236/256   2.5122    0.010
 10-year note                  100-24/256   2.6141    0.009
 30-year bond                  99-240/256   3.0031    0.013
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        11.75         0.25    
 spread                                               
 U.S. 3-year dollar swap         9.25         0.00    
 spread                                               
 U.S. 5-year dollar swap         6.50         0.00    
 spread                                               
 U.S. 10-year dollar swap        1.00        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -21.00        -0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Jeffrey
Benkoe and Susan Thomas)
  
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