August 29, 2017 / 12:46 PM / 4 months ago

TREASURIES-Yields lowest since November after North Korea fires missile

(Adds quotes, auction, economic outlook; Updates prices)

* North Korea missile sparks safety buying

* Treasury to sell $28 bln seven-year notes

* Friday’s employment report in focus

By Karen Brettell

NEW YORK, Aug 29 (Reuters) - Benchmark 10-year Treasury yields fell to their lowest since last November on Tuesday on safety buying after North Korea fired a ballistic missile over Japan’s northern Hokkaido island into the sea.

The action prompted warnings to residents to take cover and drew a sharp reaction from Japanese Prime Minister Shinzo Abe.

“That has the market spooked, and that’s what’s behind the move lower in rates today,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

Ten-year Treasury yields dropped as low as 2.086 percent, the lowest since Nov. 10, two days after Donald Trump won the U.S. presidential election, before rising back to 2.10 percent.

The yield curve between two-year and 10-year notes flattened to 77 basis points, from 83 basis points late on Monday, the lowest level since June 27.

Some reluctance to buy bonds at their lowest yields of the year was seen possibly capping the rally.

“The question becomes how heavily positioned in Treasuries do you want to be when yields are at year-to-date lows,” said Goldberg. “I think that’s making it a little bit difficult to be positioned extremely.”

The Treasury will sell $28 billion in seven-year notes on Tuesday, the final sale of $88 billion in new short- and intermediate-dated supply.

A $34 billion sale of five-year notes on Monday saw strong demand with dealers taking a record low share, while direct bidders bought their biggest stake since July 2014. The Treasury also sold $26 billion of two-year notes on Monday.

Market participants are also focused on a busy week of data this week, culminating in Friday’s employment report for August.

Longer-term investors will evaluate what impact Tropical Storm Harvey may have on the economy, after bringing catastrophic flooding to Texas.

Editing by Jeffrey Benkoe and Chizu Nomiyama

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