* Growing U.S. corporate supply pressures yields
* Expectations for more rate hikes also underpin yield rise
* U.S. 30-year yield hits highest level since late March
By Richard Leong
NEW YORK, May 9 U.S. Treasury yields climbed on
Tuesday, with benchmark yields reaching a five-week peak before
a $24 billion auction of a three-year government debt issue in
what will be the first leg of this week's $62 billion quarterly
Investors were making room in their portfolios not only for
Treasuries supply but also new corporate bond issues.
Companies raised more than $10 billon in the
investment-grade market on Monday, with more on the way. Junk
bond issuance experienced a spike, according to IFR, a Thomson
In addition to supply pressure, bond yields have risen on
investors' reduction of safe-haven holdings in Treasuries
following centrist Emmanuel Macron's victory in the French
presidential election on Sunday.
With this closely-watched European election out of the way,
investors turned their attention back to U.S. economic
fundamentals and how they would influence the pace of Federal
Reserve interest rate increases in 2017, analysts said.
"It's the refocus on the Fed's intention to raise rates,"
said Jim Vogel, interest rate strategist at FTN Financial in
Interest rates futures implied traders saw an 88 percent the
Fed would raise its benchmark overnight rate by a quarter of a
percentage point to a range of 1.00 percent to 1.25 percent at
its June 13-14 policy meeting, up from 83 percent
at Monday's close, according to CME Group's FedWatch tool.
Last week, the U.S. central bank's policy-setting committee
left the door open for further rate hikes, downplaying anemic
economic growth in the first quarter.
A solid April payrolls report that showed the U.S. jobless
rate reaching near a 10-year low augured the case for a possible
rate increase this summer, analysts said.
In early trading on Tuesday, the benchmark 10-year Treasury
yield was up nearly 3 basis points at 2.403 percent,
just below a five-year high of 2.405 percent set earlier in the
The 30-year bond yield was up about 2 basis
points at 3.033 percent after touching its highest level since
March 31, according to Reuters data.
In "when-issued" activity, traders expected the upcoming
three-year note issue to sell at a yield of 1.561
percent, compared with 1.525 percent at the prior auction,
according to Tradweb.
After the three-year note sale at 1 p.m. EDT (1700 GMT), the
Treasury Department will sell $23 billion in 10-year Treasuries
on Wednesday and $15 billion in 30-year bonds
on Thursday. It will use some of the proceeds to
repay $49.7 billion to investors on maturing bonds
May 9 Tuesday 9:31 AM New York / 1331 GMT
US T BONDS JUN7 150-27/32 -0-15/32
10YR TNotes JUN7 124-220/256 -0-52/25
Price Current Net
Yield % Change
Three-month bills 0.9 0.9146 0.000
Six-month bills 1.0175 1.037 0.005
Two-year note 99-208/256 1.3466 0.017
Three-year note 99-224/256 1.5437 0.020
Five-year note 99-192/256 1.9279 0.028
Seven-year note 98-160/256 2.2138 0.027
10-year note 98-172/256 2.4032 0.027
30-year bond 99-84/256 3.0343 0.019
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 27.50 -1.50
U.S. 3-year dollar swap 24.25 -0.75
U.S. 5-year dollar swap 8.50 -0.75
U.S. 10-year dollar swap -6.75 -0.50
U.S. 30-year dollar swap -45.50 -0.50
(Reporting by Richard Leong; Editing by Paul Simao)