May 31, 2017 / 3:13 PM / in 2 months

TREASURIES-Yields dip on month-end buying, weak U.S. housing data

5 Min Read

    * 30-yr yield hits more than 5-week low of 2.866 pct
    * 10-yr yield on track to fall about 7 basis points in May
    * U.S. pending home sales drop 1.3 pct in April

    By Sam Forgione
    NEW YORK, May 31 (Reuters) - Long-dated U.S. Treasury yields
touched their lowest in more than five weeks and benchmark
yields their lowest in nearly two weeks on month-end buying and
U.S. housing data that fanned doubts that the Federal Reserve
would raise interest rates again in 2017 beyond June. 
    U.S. 30-year yields touched 2.866 percent, their lowest
since April 21, and benchmark 10-year yields touched their
lowest in 13 days of 2.198 percent after the National
Association of Realtors said its Pending Home Sales Index, based
on contracts signed last month, dropped 1.3 percent in April to
109.8.
    That figure disappointed expectations of economists for a
0.5 percent rise last month and, together with purchases of U.S.
government debt for month-end portfolio rebalancing, pushed
yields lower. 
    "Clearly the momentum is on the side of Treasuries," said
Lou Brien, a market strategist at DRW Trading in Chicago.
    Along with 10-year yields, yields on Treasuries maturing
between three and seven years touched their lowest in 13 days,
with three-year yields hitting 1.427 percent. U.S.
two-year yields hit their lowest in eight days of
1.278 percent. Short-dated yields are considered more vulnerable
to Fed rate hikes. 
    The U.S. housing data stoked doubts that the Fed, which is
widely expected to raise interest rates at the end of its June
13-14 meeting, would hike rates again after that over the rest
of the year. The U.S. central bank last raised rates in March,
and at the time telegraphed a plan to lift them two more times
in 2017. 
    Weak U.S. economic data, including soft inflation readings,
have combined with concerns about delays to U.S. President
Donald Trump's efforts to cut taxes and increase infrastructure
spending to put 10-year yields on track to fall 7 basis points
and 30-year yields on track to drop about 8 basis points in May
to mark their second straight monthly declines.  
    "With the economy not roaring ahead, and with inflation
metrics proving disappointing, the market is not pricing in
significant tightenings by the Fed beyond June," said Stan
Shipley, bond strategist at Evercore ISI in New York. "The
housing number plays into that," he said in reference to the
pending home sales data. 
    U.S. three-year yields were last set to fall about 2 basis
points in May, while two-year yields were set to rise about 1
basis point to mark their eighth straight monthly rise. 
    Benchmark 10-year Treasuries were last up 2/32 in price to
yield 2.208 percent. 

      May 31 Wednesday 10:58AM New York / 1458 GMT
                               Price                  
 US T BONDS JUN7               154-25/32    0-6/32    
 10YR TNotes JUN7              126-120/256  0-8/256   
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.9625       0.9782    0.000
 Six-month bills               1.055        1.0754    -0.006
 Two-year note                 99-240/256   1.2818    -0.004
 Three-year note               100-50/256   1.4322    -0.003
 Five-year note                99-248/256   1.7565    -0.003
 Seven-year note               99-216/256   2.024     -0.005
 10-year note                  101-124/256  2.208     -0.007
 30-year bond                  102-120/256  2.8764    -0.008
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        22.75         0.25    
 spread                                               
 U.S. 3-year dollar swap        20.50         0.00    
 spread                                               
 U.S. 5-year dollar swap         7.25        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -6.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -44.50         0.00    
 spread                                               
 

 (Reporting by Sam Forgione; Editing by Jonathan Oatis)
  

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