April 12, 2018 / 7:34 PM / 13 days ago

TREASURIES-Yields advance as Syria worries fade, for now, after Trump comments

 (Adds comment, updates prices in text, table)
    * Trump comments soothe Syria fears
    * U.S. jobless claims come in lower than expected
    * U.S. 30-year auction shows average results  

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 12 (Reuters) - U.S. Treasury yields climbed
on Thursday as risk appetite improved and geopolitical tensions
eased after President Donald Trump said a possible attack on
Syria may not be imminent, contrary to what he signaled on
Wednesday.
    Over the last couple of sessions, the U.S. bond market has
traded off political and international headlines, temporarily
superseding economic data. Investors have kept trading ranges
fairly constrained given the overall market uncertainty, even
though the overall trend for yields remained higher. 
    Referring to his threatened strike on Syria in response to a
suspected poison gas attack on a rebel enclave, Trump tweeted on
Thursday, "Never said when an attack on Syria would take place.
Could be very soon or not so soon at all!"
    His comment pushed benchmark U.S. 10-year note yields to a
one-week high after a lackluster auction of the security on
Wednesday.
    Trump later said he was holding meetings on Thursday on
Syria and expected to make decisions "fairly soon."
    "There is less immediate concern about military strikes or
action in Syria," said Jim Vogel, interest rates strategist at
FTN Financial in Memphis, Tennessee. 
    "It doesn't move it to the back-burner, but it allows you to
look around and trade other things and that gives room for rates
to rise just a little bit from their sort of cramped or
compressed levels," he added.
    Yields were also boosted by data showing U.S. initial
jobless claims dropped 9,000 to a seasonally adjusted 233,000
for the week ended April 7, reflecting continued improvement in
the labor market.
    In afternoon trading, the U.S. 10-year yields rose to 2.833
percent, from 2.79 percent late on Wednesday.
    U.S. 30-year yields climbed to 3.04 percent,
from Wednesday's 3.005 percent.
    On the front end of the curve, U.S. 2-year yields were up at
 2.348 percent, compared with 2.311 percent on
Wednesday.
    The U.S. Treasury on Thursday also auctioned $13 billion in
reopened 30-year bonds, a day after the 10-year note sale drew 
soft demand from so-called "indirect bidders," which include
fund managers and foreign central banks. 
    The bond picked up a high yield of 3.044 percent, just below
the expected level before the bid deadline. The bid-to-cover
ratio, a gauge of demand, was 2.41, slightly lower than the
average for auctions of the same maturity.
    "The bond auction was a humdrum event as the jump in
outright yield levels brought out buyers via a strong direct
channel bid," said Aaron Kohli, director of interest rates
strategy at BMO Capital Markets in New York.
    
      April 12 Thursday 3:12PM New York / 1912 GMT
                               Price                  
 US T BONDS JUN8               145-11/32    -0-25/32  
 10YR TNotes JUN8              120-120/256  -0-96/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.7175       1.7489    0.015
 Six-month bills               1.905        1.9501    0.020
 Two-year note                 99-208/256   2.348     0.037
 Three-year note               99-168/256   2.4947    0.044
 Five-year note                99-54/256    2.6707    0.051
 Seven-year note               99-4/256     2.7814    0.050
 10-year note                  99-72/256    2.8339    0.044
 30-year bond                  99-48/256    3.0415    0.036
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        31.25         0.00    
 spread                                               
 U.S. 3-year dollar swap        24.75        -0.50    
 spread                                               
 U.S. 5-year dollar swap        13.25        -0.25    
 spread                                               
 U.S. 10-year dollar swap        3.75         0.25    
 spread                                               
 U.S. 30-year dollar swap      -12.75         0.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Frances Kerry and Dan Grebler)
  
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