* U.S. 2-, 10-year part of yield curve flattest in 7 months
* U.S. bond market to close early at 2 p.m. (1800 GMT)
(Updates market action, adds quote)
By Richard Leong
NEW YORK, May 26 U.S. Treasury yields fell on
Friday as investors bought bonds to rebalance their portfolios
at month-end, overriding an upward revision to first-quarter
gross domestic product and a smaller-than-forecast drop in
durable goods orders for April.
The S&P 500 and Nasdaq held near their record
closing highs set on Thursday, stoking some safe-haven demand
for U.S. government debt in an abbreviated trading session,
The U.S. bond market will close early at 2 p.m. (1800 GMT)
and will be shut on Monday for the U.S. Memorial Day holiday.
"People are squaring up before the long weekend," said
Kathy Jones, chief fixed income strategist at Schwab Center for
Financial Research in New York. "We are chopping around at the
low end of the recent trading range."
At 11:16 a.m. (1516 GMT), the benchmark 10-year Treasury
note's yield was down less than 1 basis point at
2.248 percent on light trading volume. It traded in a tight
seven-basis-point range this week.
The drop in the 10-year yield narrowed its gap with the
two-year yield to a shade less than 94 basis points,
the tightest in seven months, Tradeweb data
This flattening of the yield curve suggested traders had
dialed back their outlook for U.S. growth and inflation to
levels prior to Donald Trump's presidential win. Trump and
leading Republican lawmakers have not delivered tax cuts, a
healthcare overhaul and infrastructure spending, which would
bolster business investments and consumer spending.
Still Friday's data signaled the U.S. economy was expanding,
albeit at a modest clip. This may allow the Federal Reserve to
raise interest rates further and to begin paring its $4.5
trillion balance sheet.
Gross domestic product grew at a 1.2 percent annual rate in
the first quarter, faster than the 0.7 percent pace reported
last month, the Commerce Department said in its second estimate.
The agency also said durable goods orders fell 0.8 percent
in April, compared with a revised 2.3 percent gain in March and
a 1.2 percent decline forecast among analysts polled by Reuters.
May 26 Friday 10:58AM New York / 1458 GMT
US T BONDS JUN7 154-1/32 0-6/32
10YR TNotes JUN7 126-64/256 0-20/256
Price Current Net
Yield % Change
Three-month bills 0.9175 0.9323 0.000
Six-month bills 1.0525 1.0727 -0.002
Two-year note 99-232/256 1.2976 0.000
Three-year note 100-34/256 1.4539 -0.003
Five-year note 99-214/256 1.7845 -0.005
Seven-year note 99-164/256 2.0554 -0.012
10-year note 101-48/256 2.2412 -0.014
30-year bond 101-224/256 2.9058 -0.015
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 23.50 -0.25
S U.S. 3-year dollar swap 21.25 -0.25
U.S. 5-year dollar swap 8.75 0.25
U.S. 10-year dollar swap -5.00 0.50
U.S. 30-year dollar swap -43.75 0.50
(Editing by Bernadette Baum and Lisa Von Ahn)