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TREASURIES-Yields tumble on weak U.S. auto sales, 2nd-qtr allocation shift
April 3, 2017 / 7:39 PM / 8 months ago

TREASURIES-Yields tumble on weak U.S. auto sales, 2nd-qtr allocation shift

    * Lack of confidence in "Trump trade" boosts Treasuries
    * Deadly Russia subway explosion contributes to risk-off

 (Updates prices, adds analyst comment)
    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 weaker-than-expected U.S. auto sales 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 level since Feb. 27, after the disappointing March
sales by major U.S. automakers heightened concerns that
America's long, robust boom car sales cycle may finally be
losing steam.
    "U.S. auto sales raise questions about consumer demand,
consumer spending going forward," said bond strategist Stan
Shipley of Evercore ISI in New York. "And therefore, you’re
going to question how many times the Fed can tighten and how
high can the 10-year yield rise." 
    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 0.2 percent.
    Factors such as a less hawkish-than-expected Federal Reserve
and reduced confidence in fiscal stimulus from President Donald
Trump's administration motivated investors to shift into
Treasuries, analysts said.
    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
level since Feb. 28, at 1.448 percent and 1.863 percent,
respectively, while seven-year yields hit their lowest level
since Feb. 27, at 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."
    Analysts said an explosion that tore through a train
carriage in a St. Petersburg, Russia, metro tunnel in what
authorities called a probable terrorist attack, killing 10
people, was another catalyst for the risk-off move into
safe-haven U.S. Treasuries. [nL5N1HB3V4
    U.S. 30-year Treasury bonds were last up 25/32
in price to yield 2.978 percent, from a yield of 3.017 percent
late Friday. U.S. 10-year Treasury notes were up
14/32 in price to yield 2.344 percent, from a yield of 2.395
percent late Friday. 
    April 3 Monday 3:19PM New York / 1919 GMT
 US T BONDS JUN7               151-27/32    1         
 10YR TNotes JUN7              125-8/256    0-120/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.7525       0.7643    0.002
 Six-month bills               0.8825       0.8987    -0.005
 Two-year note                 100-6/256    1.238     -0.020
 Three-year note               100-122/256  1.459     -0.038
 Five-year note                99-254/256   1.8766    -0.051
 Seven-year note               99-198/256   2.1601    -0.057
 10-year note                  99-40/256    2.3461    -0.049
 30-year bond                  100-112/256  2.9777    -0.039
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        35.00        -1.75    
 U.S. 3-year dollar swap        30.50        -1.50    
 U.S. 5-year dollar swap        12.75         0.00    
 U.S. 10-year dollar swap       -1.25        -0.50    
 U.S. 30-year dollar swap      -37.75        -1.00    
 (Reporting by Sam Forgione; Editing by James Dalgleish and
Leslie Adler)

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