March 13, 2019 / 7:11 PM / 5 months ago

TREASURIES-Yields rise as risk appetite improves, after soft U.S. 30-year auction

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

 (Adds comment, auction results, 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 stabilized, with a poor 30-year bond
auction further lifting rates.
    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.
    Shipley said, however, that in the midst of Brexit, the U.S.
economy has slowed, but is not in terrible shape.
    Investors are keeping a close eye on the developments over
Britain's exit from the European Union, Shipley said, noting any
chaos or turmoil from Brexit would have limited impact on the
United States.
    British lawmakers were set to vote on Wednesday against the
threat of a 'no-deal' exit from the EU on March 29 after a
second defeat for Prime Minister Theresa May's divorce agreement
left Britain heading into the unknown.
    "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 afternoon trading, U.S. 10-year note yields rose to 2.612
percent from 2.605 percent late on Tuesday.
    U.S. 30-year bond yields were up at 3.011 percent
 from 2.99 percent on Tuesday.
    But yields on both 10-year notes and 30-year bonds have
fallen in six of the last eight sessions.
    Wednesday's U.S. 30-year auction was not nearly as strong as
Tuesday's 10-year note sale. The auction stopped at 3.014
percent, higher than the expected rate at the bid deadline.
There were almost $36.1 billion in bids for a 2.25 bid-to-cover
ratio, below the prior 2.27, and the 2.31 average.
    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.
    
    Wednesday, March 13, at 1458 EDT (1858 GMT):
                               Price        Current   Net
                                            Yield     Change
                                            (pct)     (bps)
 Three-month bills             2.3975       2.4456    -0.014
 Six-month bills               2.4525       2.5178    -0.014
 Two-year note                 100-23/256   2.4526    0.000
 Three-year note               99-232/256   2.4076    -0.005
 Five-year note                99-208/256   2.4152    0.001
 Seven-year note               99-248/256   2.5048    0.003
 10-year note                  100-28/256   2.6123    0.007
 30-year bond                  99-200/256   3.0111    0.021
                                                      
   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         9.50         0.25    
 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      -21.50        -1.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by
Susan Thomas and James Dalgleish)
  
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