* U.S. 5-to-30-yr yield curve retreats from steepest since
* BOJ seen more likely to make surprise policy move than Fed
* U.S. home builder sentiment index rises to highest since
* Japanese financial markets closed for holiday
(Updates market action, adds quote)
By Richard Leong
NEW YORK, Sept 19 U.S. Treasuries yields slipped
on Monday as traders booked profits made on curve-steepening
bets ahead of monetary policy meetings this week at the Bank of
Japan and the U.S. Federal Reserve.
Trading volume was light amid a market holiday in Japan and
a dearth of U.S. economic data.
"We swung too pessimistically with curve steepening. It's
just some repositioning ahead of the Fed and BOJ meetings," said
Jason Celente, senior fixed income portfolio manager at Insight
Investment in New York.
Traders reduced their positions on longer-dated global bond
yields rising faster than short-dated yields following the
European Central Bank's decision on Sept. 8 to refrain from
extending its bond purchase program worth more than one trillion
euros beyond March 2017 for now.
The ECB move raised speculation major central banks would no
longer pursue more quantitative easing and other unconventional
policies to drive down long-term borrowing costs and stimulate
Some traders anticipate the BOJ might embark on a move to
lower its target interest rate deeper into negative territory,
and reduce its bond purchases to hold down long-dated yields.
"There's more of a potential surprise from the BOJ. The Fed
is not going to do much," said Larry Milstein, head of
government and agency trading at R.W. Pressprich & Co. in New
Meanwhile, analysts widely expect the Fed to hold short-term
interest rates at the current 0.25-0.50 percent target
Traders, however, remain skeptical of policy changes from
either central bank on Wednesday.
Interest rates market implied traders saw a 17 percent
chance the BOJ would cut its target rate to -0.30 percent from
-0.10 percent on Wednesday, while they priced in an 11 percent
probability the Fed would raise rates, Reuters data showed.
Separately, there was scant safehaven buying related to an
explosion that injured 29 people in New York City on Saturday,
traders and analysts said.
Benchmark 10-year Treasury notes were up 2/32 in price for a
yield of 1.694 percent, down 0.7 basis point from late on
Treasury yields briefly turned flat after a private gauge on
U.S. home builder sentiment unexpectedly rose in September to
its strongest level in 11 months.
The yield gap between five-year and 30-year Treasuries
contracted to 124 basis points after reaching 130 basis points
last Thursday, which was its widest level since June 27,
according to Tradeweb.
September 19 Monday 3:01PM New York / 1901 GMT
US T BONDS DEC6 165-23/32 0-2/32
10YR TNotes DEC6 130-104/256 0
Price Current Net
Yield % Change
Three-month bills 0.2525 0.2562 -0.033
Six-month bills 0.4775 0.4853 -0.008
Two-year note 99-244/256 0.7743 -0.004
Three-year note 99-226/256 0.9149 0.000
Five-year note 99-156/256 1.2066 -0.003
Seven-year note 99-32/256 1.5081 -0.002
10-year note 98-52/256 1.6979 -0.003
30-year bond 95-228/256 2.4445 -0.007
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 25.25 0.00
U.S. 3-year dollar swap 17.75 -0.25
U.S. 5-year dollar swap 1.75 0.50
U.S. 10-year dollar swap -17.00 0.25
U.S. 30-year dollar swap -56.00 0.50
(Reporting by Richard Leong; Editing by Bernadette Baum and