June 8, 2015 / 4:07 PM / 3 years ago

TREASURIES-U.S. bond yields dip as Greece worries stoke safety bid

* Greece worries rekindle safety bid for U.S. bonds
    * U.S. to sell $58 bln in 3- , 10- and 30-year debt
    * Heavy corporate supply seen capping Treasuries demand

 (Adds quote, updates market action)
    By Richard Leong
    NEW YORK, June 8 (Reuters) - U.S. Treasuries yields fell on
Monday with benchmark yields retreating from seven-month highs
as concerns about Greece and its ability to avert default
renewed safe-haven investor demand for lower-risk government
    Greece and its creditors have not reached a deal so that the
cash-strapped country could obtain more funds. Greece delayed a
300 million euro payment to the International Monetary Fund last
week and rattled investors on Friday when Prime Minister Alexis
Tsipras outright rejected a proposal from lenders.
    Athens struck a more conciliatory tone on Monday, giving
some hopes that an agreement may be obtained by the end of June.
    "Greece is clearly a big issue. People are watching and
waiting," said John Herrmann, an interest rates strategist at
Mitsubishi UFJ Securities USA Inc in New York.
    The safety bid provided a respite for the U.S. bond market,
coming off its worst week in three months.
    A surprisingly strong U.S. payrolls report for May raised
bets the Federal Reserve may hike interest rates later this
year. It also spurred selling on Friday, resulting in benchmark
10-year Treasury yields booking their largest one-week increase
in nearly two years.
    Wall Street's top banks now expect the U.S. central bank to
begin raising rates in September, followed by another hike
before year-end, a Reuters poll on Friday showed.
    The yield on 10-year Treasury notes last traded
at 2.386 percent, down 1 basis point from late on Friday. It hit
2.442 percent on Friday, which was the highest since early
October, according to Tradeweb.
    The 30-year bond yield declined by 0.5 basis
point to 3.106 percent, while the five-year yield 
fell 2 basis points to 1.715 percent.
    A drop in yields will likely be limited as investors seek to
reduce their Treasuries holdings in anticipation of this week's
    The Treasury Department will sell a combined $58 billion in
3-, 10- and 30-year securities, starting on Tuesday.
    Investors also face plenty of choices from the
higher-yielding corporate bond sector, analysts said.
    Companies are expected to sell about $30 billion in
investment-grade debt this year, according to IFR, a unit of
Thomson Reuters. 
    "Foreign demand looking for higher yields in the U.S. will
likely support these auctions," said Stan Shipley, a strategist
at Evercore ISI in New York.
    German 10-year Bunds were yielding 0.886
percent, about 1.50 percentage points below their U.S.

 (Editing by G Crosse)
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