June 8, 2015 / 7:43 PM / 2 years ago

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

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

 (Updates with late-afternoon market action)
    By Richard Leong
    NEW YORK, June 8 (Reuters) - Yields on U.S. Treasury debt
ended mostly lower on Monday with benchmark yields retreating
from seven-month highs as concerns about Greece and its ability
to avert default renewed demand from investors for lower-risk
government debt.
    Greece and its creditors have not reached a deal for the
cash-strapped country to 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 rejected a proposal from lenders.
    Athens struck a more conciliatory tone Monday, raising hopes
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 on Friday
had raised bets the Federal Reserve may hike U.S. 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 Fed, 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 2.390 percent, down 1 basis point from late on Friday. It hit
2.442 percent on Friday, the highest since early October.
    The five-year yield fell 3 basis points to 1.712
percent.
    But the 30-year bond yield turned flat in late
trading, paring its earlier fall. It was last up 0.5 basis point
to 3.115 percent. 
    The drop in yields will likely be limited as investors seek
to reduce Treasuries holdings ahead of this week's supply.
    The Treasury Department will sell a combined $58 billion in
three-, 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.
counterparts.

 (Editing by G Crosse and James Dalgleish)

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