January 11, 2017 / 8:44 PM / 6 months ago

TREASURIES-U.S. yields fall on Trump, strong 10-year auction

5 Min Read

* U.S. sells $20 bln in 10-year note supply to strong demand
    * U.S. 30-year yield briefly hits lowest in nearly two
months
    * Trump's remarks knock stocks, raise safe-haven bids for
bonds
    * Trump's silence on taxes, spending add to bond demand

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Jan 11 (Reuters) - U.S. Treasury debt yields fell
on Wednesday with benchmark yields briefly touching the lowest
in a month following stellar demand at a 10-year note sale,
while President-elect Donald Trump's remarks spurred safe-haven
demand for bonds.
    Trump's first news conference since the Nov. 8 election
contained no details on tax cuts and infrastructure spending,
which were two factors that ignited a five-week global bond
market selloff after his surprise presidential win.
    The absence of details on these key issues Trump campaigned
on during the news conference added to bids for longer-dated
Treasuries with traders buying to close out some of their
bearish bond bets, analysts said.
    "Trump's silence on tax reform and infrastructure let
additional air escape from the post-election, 'hate bonds'
campaign," said Jim Vogel, interest rate strategist at FTN
Financial in Memphis, Tennessee.
    The yield on 10-year Treasury notes was down 0.5
basis point at 2.374 percent. It traded as low as 2.329 percent,
which was the lowest since Nov. 30, following the 10-year note
auction, part of this week's $56 billion in longer-dated
government debt supply. 
    The 30-year bond yield fell to a near two-month
low of 2.926 percent before retracing to 2.961 percent, down 1
basis point on the day. 
    The Treasury Department's $20 billion reopening of an older
10-year note issue brought a bid-to-cover ratio of 2.58, which
was the strongest since June 2016. 
    The Treasury will complete this week's auctions with a $12
billion sale of 30-year bonds on Thursday. The
Treasury auctioned $24 billion of 3-year notes on Tuesday. 
    Bond purchases were underpinned earlier Wednesday by remarks
from Trump during his press conference when he said
pharmaceutical companies are "getting away with murder" in what
they charge the government for medicines, and promised that
would change, sending drugs stocks sharply lower. 
    The weakness in the pharmaceutical sector briefly reduced
gains across Wall Street and lifted demand for Treasuries,
analysts said.
    Analysts expect there is more room for the Treasuries market
to recover from its post-election losses until there is more
clarity on the fiscal stimulus programs Trump and Republican
lawmakers have pledged to enact.
    "We had moved so far with not a lot happening," said James
Sarni, senior portfolio manager at Payden & Rygel in Los
Angeles.
  January 11 Wednesday 3:24PM New York / 2024 GMT
                               Price                  
 US T BONDS MAR7               152-25/32    0-8/32    
 10YR TNotes MAR7              124-200/256  0-4/256   
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.5075       0.5152    -0.005
 Six-month bills               0.59         0.6       -0.003
 Two-year note                 100-30/256   1.1895    -0.005
 Three-year note               99-186/256   1.4686    -0.006
 Five-year note                100-144/256  1.8808    0.002
 Seven-year note               100-112/256  2.1819    -0.001
 10-year note                  96-192/256   2.3721    -0.007
 30-year bond                  98-84/256    2.9596    -0.011
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        29.00         0.50    
 spread                                               
 U.S. 3-year dollar swap        20.50        -2.00    
 spread                                               
 U.S. 5-year dollar swap         4.50         0.25    
 spread                                               
 U.S. 10-year dollar swap      -12.50         0.25    
 spread                                               
 U.S. 30-year dollar swap      -48.50         0.25    
 spread                                               
 
    

 (Reporting by Richard Leong; Editing by Chris Reese)

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