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TREASURIES-U.S. bond yields fall before 10-year note auction
April 11, 2017 / 2:51 PM / 8 months ago

TREASURIES-U.S. bond yields fall before 10-year note auction

    * U.S. to sell $20 billion 10-year notes at 1 p.m. EDT
    * Geopolitical worries underpin safe-haven demand for bonds
    * Fed's Kashkari to make public appearance at 1:45 p.m. EDT

 (Update market action to late morning)
    By Richard Leong
    NEW YORK, April 11 (Reuters) - U.S. Treasury yields fell on
Tuesday for a second straight day as anxiety about possible U.S.
military strikes against Syria and North Korea and the outcome
of the French presidential election spurred safe-haven demand
for U.S. government debt.
    The decline in bond yields was limited by selling among
investors and dealers to make room for $20 billon worth of
10-year Treasury notes, which is part of this week's $56 billion
worth of coupon-bearing government bond supply.
    "Any escalation in geopolitical concerns could push us back
lower in yields," said Justin Lederer, Treasury strategist at
Cantor Fitzgerald in New York.
    North Korean state media warned on Tuesday of a nuclear
attack on the United States in retaliation to any signs of U.S.
aggression amid worries about North Korea's advancing weapons
    The White House signaled it was open to additional strikes
on Syria if its government uses chemical weapons again or
deploys barrel bombs. U.S. President Donald Trump ordered a
missile strike on a Syrian air base last week in response to an
alleged Syrian military attack using poison gas that killed
scores of civilians.
    Furthermore, a new poll suggesting a tightening presidential
race in France stoked worries about an anti-EU candidate, either
National Front's Marine Le Pen or far-left wildcard Jean-Luc
Melenchon, winning it all in next month's run-off.
    Benchmark 10-year Treasury yields were down 5
basis points at 2.312 percent in late morning trading on
Tuesday. Last Friday they fell to 2.269 percent, the lowest
intraday level since Nov. 18, following a government report
showing a steep drop in domestic hiring in March.
    Trading volume has been muted due to the Passover and
upcoming Easter holidays. U.S. financial markets will close on
the Good Friday holiday. 
    Traders expected the upcoming 10-year auction at 1 p.m.
(1700 GMT) to sell at a yield of 2.326 percent,
lower than the 2.560 percent set at the prior auction which was
the highest yield since July 2014.
    Separately, investors have been monitoring for further clues
on the Federal Reserve's possible plan to begin paring
reinvestments into Treasuries and mortgage-backed securities
later this year, which is seen as a major step for the Fed to
unwind an extraordinary policy it adopted to combat the last
    At 1:45 p.m. (1745 GMT), Minneapolis Fed President Neel
Kashkari will participate in a question-and-answer session at an
event held by a Minnesota business group.
  April 11 Tuesday 10:43AM New York / 1443 GMT
 US T BONDS JUN7               152-27/32    1-2/32    
 10YR TNotes JUN7              125-96/256   0-120/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.81         0.823     -0.013
 Six-month bills               0.9275       0.9448    -0.020
 Two-year note                 100-4/256    1.2419    -0.032
 Three-year note               100-16/256   1.4786    -0.042
 Five-year note                100-38/256   1.8435    -0.056
 Seven-year note               100-4/256    2.1225    -0.059
 10-year note                  99-124/256   2.3087    -0.052
 30-year bond                  101-60/256   2.9375    -0.049
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        32.50         0.25    
 U.S. 3-year dollar swap        24.50        -2.25    
 U.S. 5-year dollar swap        10.00         0.50    
 U.S. 10-year dollar swap       -3.75         0.00    
 U.S. 30-year dollar swap      -40.00         0.00    

 (Reporting by Richard Leong; Editing by Meredith Mazzilli)

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