* U.S. 3-year yield reaches 7-week peak after soft auction
* Growing U.S. corporate supply pressures yields higher
* Expectations for more rate hikes also underpin yield rise
(Updates market action, adds quote)
By Richard Leong
NEW YORK, May 9 U.S. Treasury yields rose on
Tuesday, with benchmark yields hitting a five-week peak as
investors were making room in their portfolios for $62 billion
in supply from the May refunding and a growing calendar of
corporate bond issues.
Companies raised more than $10 billon in the
investment-grade market on Monday, with more on the way. Junk
bond issuance spiked following an earnings-related lull,
according to IFR, a Thomson Reuters unit.
Bond yields also climbed as investors reduced safe-haven
holdings in Treasuries in the wake of centrist Emmanuel Macron's
victory in the French presidential election on Sunday.
"The modest sell-off we have seen stemmed from the news
about the French election. There won't be another disruptive
force for financial markets," said Dominic Pappalardo, portfolio
manager at McDonnell Investment in Oakbrook Terrace, Illinois.
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.
Interest rates futures implied traders saw an 88 percent
that 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
Last week, the U.S. central bank left the door open for
further rate hikes, downplaying anemic economic growth in the
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.
The benchmark 10-year Treasury yield was up 3
basis points at 2.405 percent, below a five-week high of 2.416
percent set earlier on Tuesday.
The 30-year bond yield was up over 2 basis
points at 3.039 percent after touching its highest level since
March 31, according to Reuters data.
The three-year yield increased to a seven-week
high at 1.560 percent following a weak $24 billion three-year
note auction, the first leg of the May quarterly refunding in
which the government will repay $49.7 billion to its
While demand for the three-year issue was within recent
averages, the Treasury ended up paying nearly 1 basis point more
in yield than what traders had expected.
After the three-year note sale, the Treasury will sell $23
billion in 10-year Treasuries on Wednesday and
$15 billion in 30-year bonds on Thursday.
May 9 Tuesday 3:19PM New York / 1919 GMT
US T BONDS JUN7 150-23/32 -0-19/32
10YR TNotes JUN7 124-216/256 -0-56/25
Price Current Net
Yield % Change
Three-month bills 0.9 0.9146 0.000
Six-month bills 1.015 1.0344 0.002
Two-year note 99-204/256 1.3546 0.025
Three-year note 99-218/256 1.5519 0.028
Five-year note 99-184/256 1.9345 0.035
Seven-year note 98-152/256 2.2187 0.032
10-year note 98-164/256 2.4068 0.031
30-year bond 99-60/256 3.0391 0.024
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 26.75 -2.25
U.S. 3-year dollar swap 23.50 -1.50
U.S. 5-year dollar swap 8.00 -1.25
U.S. 10-year dollar swap -7.25 -1.00
U.S. 30-year dollar swap -45.50 -0.50
(Reporting by Richard Leong; Editing by Paul Simao and Richard