April 3, 2017 / 3:59 PM / 4 months ago

TREASURIES-Yields tumble on Russia explosion, 2nd-qtr allocation shift

5 Min Read

    * Deadly Russia subway explosion triggers risk-off move
    * Reallocation into Treasuries to start 2nd quarter garners
demand
    * Lack of confidence in "Trump trade" boosts Treasuries

    By Sam Forgione
    NEW YORK, April 3 (Reuters) - U.S. Treasury yields fell on
Monday, with benchmark 10-year yields touching more than
one-month lows after a deadly explosion in a metro tunnel in
Russia and reallocation into U.S. government debt at the start
of the quarter boosted demand.
    Yields on 10-year U.S. Treasury notes touched 2.332 percent,
their lowest since Feb. 27, after at least nine people were
killed and 20 were injured when an explosion tore through a
train carriage in a St. Petersburg metro tunnel. Interfax news
agency said the blast may have been caused by an explosive
device hidden in a briefcase.
    "With everything surrounding all the intrigue, real or
discussed between the U.S. administration and Russian officials,
the subway bombing in St. Petersburg sort of creates a new
sensitivity in the U.S. market as well," said Jim Vogel,
interest rates strategist at FTN Financial in Memphis.
    Analysts also said investors' performance was reset for the
second quarter, giving them an opportunity to either reduce
short positions in Treasuries or sell stocks and reallocate into
U.S. debt. The benchmark U.S. S&P 500 stock index was
last down 0.6 percent.
    They said factors such as a less hawkish than expected
Federal Reserve and reduced confidence in fiscal stimulus from
U.S. President Donald Trump's administration motivated investors
to shift into Treasuries.
    New York and other states challenged the Trump
administration on Monday for illegally blocking energy
efficiency standards, casting further doubt on the new
government's ability to push through planned reforms.

    Yields on three- and five-year Treasuries hit their lowest
since Feb. 28 of 1.451 percent and 1.863 percent, while
seven-year yields hit their lowest since Feb. 27 of 2.147
percent and two-year yields touched a one-week low of 1.234
percent.
    "Certainly the Trump-flation trade seems a lot more wobbly
now," said Aaron Kohli, an interest rate strategist at BMO
Capital Markets in New York. "There is no real reason to be
aggressively maintaining a big short base in Treasuries."
    U.S. 30-year Treasury bonds were last up 31/32
in price to yield 2.968 percent, from a yield of 3.017 percent
late Friday. U.S. 10-year Treasury notes were up
16/32 in price to yield 2.337 percent, from a yield of 2.395
percent late Friday. 
    
  April 3 Monday 11:45AM New York / 1545 GMT
                               Price                  
 US T BONDS JUN7               152-5/32     1-10/32   
 10YR TNotes JUN7              125-24/256   0-136/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.755        0.7669    0.005
 Six-month bills               0.8875       0.9038    0.000
 Two-year note                 100-8/256    1.234     -0.024
 Three-year note               100-130/256  1.4482    -0.049
 Five-year note                100-10/256   1.8667    -0.061
 Seven-year note               99-212/256   2.1516    -0.065
 10-year note                  99-64/256    2.3354    -0.060
 30-year bond                  100-172/256  2.9658    -0.051
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        35.25        -1.50    
 spread                                               
 U.S. 3-year dollar swap        31.00        -1.00    
 spread                                               
 U.S. 5-year dollar swap        13.00         0.25    
 spread                                               
 U.S. 10-year dollar swap       -0.50         0.25    
 spread                                               
 U.S. 30-year dollar swap      -37.00        -0.25    
 spread                                               
 
 (Reporting by Sam Forgione; Editing by James Dalgleish)
  

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