January 12, 2017 / 3:04 PM / 8 months ago

TREASURIES-U.S. yields fall ahead of 30-year bond sale

* U.S. Treasury Dept to sell $12 bln in 30-year bond supply
    * U.S. yields fall more as Trump mum on policy details
    * Fed's Harker sees three U.S. rate increases in 2017
    * U.S. 10-year yield dips below 50-day moving average

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Jan 12 (Reuters) - U.S. Treasury debt yields
declined on Thursday, with the 30-year yield hitting a two-month
low in advance of $12 billion of 30-year bond supply, the final
leg of this week's $56 billion in longer-dated government debt
supply.
    The bond market continued to recover from a dramatic selloff
following Donald Trump's surprise presidential win on Nov. 8. 
    Benchmark Treasury yields have fallen from their highest
levels in over two years reached in mid-December on renewed
appetite for bonds and a lack of details on economic stimuli
pledged by Trump during his campaign.
    Trump, in his first news conference since capturing the
White House on Wednesday, did not disclose more on his plan for
tax cuts, infrastructure spending and looser regulations. Still,
he criticized the high pricing of drugs and defense equipment
and promised to slap a border tax on companies that move jobs
overseas. 
    Traders had bet that Trump, with a Republican-controlled
Congress, would enact measures to promote spending and
investment, which may also fuel inflation and federal borrowing.
    "Trump's lack of economic focus at yesterday's press
conference was a disappointment for those looking for details on
his stimulus plan, or perhaps better said, for those holding out
for details on his stimulus plan," NatWest Markets analysts
wrote in a research note.
    The yield on benchmark 10-year Treasury notes 
was 2.332 percent, down 4 basis points from late Wednesday.
Earlier it fell below its 50-day moving average, a bullish
technical signal, for the first time since late September,
according to Reuters data.
    The 30-year bond yield was down nearly 4 basis
points at 2.921 percent after touching 2.902 percent, the lowest
in two months.
    As traders second-guessed Trump's economic policies, Federal
Reserve officials hinted on Thursday that more interest rate
increases are coming following a widely expected quarter point
hike in December.
    The U.S. economy is gathering enough strength to warrant
three rate increases in 2017, Philadelphia Fed President Patrick
Harker said. 
    The labor market showed resilience with jobless claims
rising to a lower-than-expected 247,000 last week. 
    Despite the likelihood of more rate hikes, investors seem
focused on adding bonds back to their portfolios after dumping
them following Trump's election win, analysts said.
    In "when-issued" activity, traders expected the latest
30-year bond supply to sell at a yield of 2.972 percent
, according to Tradeweb. 
    Last month, the Treasury sold 30-year bonds at a 3.152
percent yield, the highest since September 2014. 
    
January 12 Thursday 9:44AM New York / 1444 GMT
                               Price                  
 US T BONDS MAR7               153-17/32    0-23/32   
 10YR TNotes MAR7              125-24/256   0-72/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.505        0.5127    -0.002
 Six-month bills               0.5925       0.6025    0.002
 Two-year note                 100-40/256   1.1692    -0.016
 Three-year note               99-208/256   1.4392    -0.024
 Five-year note                100-190/256  1.8428    -0.033
 Seven-year note               100-180/256  2.1407    -0.036
 10-year note                  97-28/256    2.3304    -0.040
 30-year bond                  99-24/256    2.9206    -0.036
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        29.50         0.25    
 spread                                               
 U.S. 3-year dollar swap        21.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         4.50         0.25    
 spread                                               
 U.S. 10-year dollar swap      -12.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -48.25         0.25    
 spread                                               
 
    

 (Reporting by Richard Leong; Editing by Bernadette Baum)

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