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TREASURIES-U.S. bond yields edge down ahead of 3-year auction
April 10, 2017 / 3:24 PM / 8 months ago

TREASURIES-U.S. bond yields edge down ahead of 3-year auction

    * U.S. to sell $24 billion 3-year notes at 1 p.m. EDT
    * Fed could begin balance sheet wind-down by year-end
-Bullard
    * Yellen to speak on policy at U. Michigan at 4:10 p.m. EDT

 (Updates prices, adds comments)
    By Richard Leong
    NEW YORK, April 10 (Reuters) - U.S. Treasury yields dipped
on Monday in advance of the  government's $24 billion debt
auction, part of its $56 billion sale of notes and bonds this
week.
    Reduced trading volume due to Passover and Easter holidays
this week may end up depressing bids for the latest wave of
Treasuries, analysts said.
    "The auctions this week are going to be a challenge," said
Sharon Stark, fixed income strategist at InCapital LLC in Boca
Raton, Florida.
    The U.S. Treasury Department will sell $20 billion in
10-year notes on Tuesday and $12 billion in 30-year bonds on
Wednesday.
    Geopolitical tension in the Middle East and the Korean
peninsula, following a somewhat weaker-than-expected March U.S.
jobs report released on Friday, has underpinned safehaven demand
for low-risk government debt, analysts said.
    The decline in bond yields was limited by remarks from
Federal Reserve officials on the possibility the U.S. central
bank would begin paring reinvestments into Treasuries and
mortgage-backed securities.
    Earlier Monday, St. Louis Fed President James Bullard said
the Fed could begin winding down its $4.5 trillion balance sheet
later this year.
    Wall Street's top banks see the central bank making such a
move in 2017, according to a Reuters poll conducted on Friday.

    "The Fed is worried about complacency in the market. They
want to be as clear as possible and give the market plenty of
lead time," Stark said.
    Investors await further clues on balance sheet normalization
from Fed Chair Janet Yellen who will participate in a discussion
on public policy at the University of Michigan at 4:10 p.m.
(2010 GMT).
   The benchmark 10-year Treasury yield was 2.364
percent, down 1 basis point from late on Friday, while the
30-year yield was 1 basis point lower at 2.988
percent.
    In "when-issued" activity, traders expected the Treasury
will sell the upcoming three-year note at a yield
of 1.523 percent, compared with 1.630 percent at last month's
three-year auction, Tradeweb data showed. 
    U.S. financial markets will close on the Good Friday
holiday. 
    
April 10 Monday 10:45AM New York / 1445 GMT
                               Price                  
 US T BONDS JUN7               151-25/32    0-9/32    
 10YR TNotes JUN7              124-228/256  0-20/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.8075       0.8203    0.000
 Six-month bills               0.94         0.9575    0.005
 Two-year note                 99-242/256   1.2781    -0.008
 Three-year note               100-92/256   1.4989    -0.005
 Five-year note                99-226/256   1.8998    -0.011
 Seven-year note               99-160/256   2.1832    -0.009
 10-year note                  99           2.3643    -0.009
 30-year bond                  100-64/256   2.9872    -0.010
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        31.50        -1.25    
 spread                                               
 U.S. 3-year dollar swap        26.00        -2.00    
 spread                                               
 U.S. 5-year dollar swap         9.50        -1.00    
 spread                                               
 U.S. 10-year dollar swap       -3.75        -0.75    
 spread                                               
 U.S. 30-year dollar swap      -40.00         0.00    
 spread                                               
 
    

 (Reporting by Richard Leong Editing by W Simon)
  

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