August 7, 2018 / 1:39 PM / 4 months ago

CORRECTED-TREASURIES-U.S. bond yields rise on supply, stock gains

 (Corrects paragraph 11 to make it China instead of Canada)
    * U.S. sells most 3-year note supply in eight years
    * Chinese stocks post biggest gain in over two years

    By Richard Leong
    NEW YORK, Aug 7 (Reuters) - U.S. Treasury yields rose on
Tuesday as a bounce in global stock prices spurred investors to
reduce their safe-haven bond holdings ahead of the first leg of
this week's $78 billion quarterly government refunding.
    The U.S. Treasury Department will sell $34 billion in
three-year notes at 1 p.m. (1700 GMT). It will be
the largest three-year auction in eight years. 
    The Treasury will sell a record amount of 10-year debt worth
$26 billion on Wednesday, and an all-time high
of $18 billion in 30-year bonds on Thursday.

    "All three auctions should go fine," said Mike Lorizio, head
of U.S. Treasuries trading at Manulife Asset Management in
Boston. "The three-year auction has been an easy one."
    Analysts expect the upcoming three-year note sale to recover
from the prior month's poor results when bidding fell to its
weakest level since April 2009.
    Data suggested overall interest in three-year Treasuries has
cooled as the Federal Reserve has further increased key
overnight borrowing costs in 2018. 
    The U.S. central bank is widely expected to lift short-term
interest rates by a quarter of a percentage point to a range of
2 percent to 2.25 percent at its Sept. 25-26 policy meeting. 
    Investors also face supply from the corporate bond market
where companies raised $10.45 billion in the investment-grade
sector on Monday, according to IFR, a unit of Thomson Reuters.

    At 9:19 a.m. (1319 GMT), traders expected the latest
three-year issue to fetch a yield of 2.757
percent, up from 2.685 percent at the previous three-year
auction in July, Tradeweb data showed.
    On modest volume in the open market, the three-year note
yield was up 1 basis point at 2.747 percent, not far
below the 2.791 percent level set last week, which was the
highest since December 2007, according to Reuters data.
    The benchmark 10-year yield rose over 1 basis
point to 2.954 percent. It fell to a two-week low of 2.925
percent on Monday on safe-haven demand spurred by the trade
friction between the United States and China.
    Reduced appetite for U.S. bonds on Tuesday stemmed from
gains in global equity markets, led by Chinese stocks which
recorded their biggest rise in over two years on optimism about
fresh government spending.
    "It's the bounce in stocks and other risky assets that
caused an uptick in yields," Lorizio said.
August 7 Tuesday 9:21AM New York / 1321 GMT
                               Price                  
 US T BONDS SEP8               142-31/32    -9/32     
 10YR TNotes SEP8              119-156/256  -4/32     
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.0175       2.0561    0.003
 Six-month bills               2.1775       2.2323    0.021
 Two-year note                 99-238/256   2.6615    0.013
 Three-year note               99-168/256   2.7473    0.016
 Five-year note                99-170/256   2.8227    0.019
 Seven-year note               99-212/256   2.9023    0.017
 10-year note                  99-84/256    2.9544    0.016
 30-year bond                  100-128/256  3.099     0.017
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       29.10        0.10      
 30-year vs 5-year yield       27.50        -0.80     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        20.75        -0.25    
 spread                                               
 U.S. 3-year dollar swap        18.50        -0.25    
 spread                                               
 U.S. 5-year dollar swap        13.75        -0.50    
 spread                                               
 U.S. 10-year dollar swap        6.25        -0.50    
 spread                                               
 U.S. 30-year dollar swap       -6.00        -0.50    
 spread                                               
 
    

    
 (Reporting by Richard Leong
Editing by Paul Simao)
  
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