January 9, 2018 / 4:16 PM / 5 months ago

TREASURIES-Benchmark yields hit 10-month high as BOJ cuts bond buys

    * 10-year yields hit a 10-month month high
    * BOJ trims bond buying, sparking sell-off
    * US Treasury to sell $24 bln in 3-year notes at 1 pm EST

    By Kate Duguid
    NEW YORK, Jan 9 - Yields on the benchmark U.S. government
bond hit a 10-month high on Tuesday after the Bank of Japan said
it will trim its purchases of Japanese government bonds. 
    The announcement raised speculation the Japanese central
bank may wind down its monetary stimulus this year.
    Although the move was in line with the BOJ's slow reduction
in bond buying, it highlights the sensitivity of markets to
global monetary policy. 
    "We don’t necessarily see this as a signal of impending
policy change, but investors are very sensitive to the overall
monetary policy backdrop, especially out of the major central
banks", said John Briggs, head of Americas strategy at NatWest
Markets in Stamford, Connecticut. "Any worries about changes to
Bank of Japan policies will have spillover into other markets."
    The move in longer-dated bonds steepened the yield curve
amid an overall flattening trend coming into the new year. The
spread between two-year and 10-year yields rose
to 56 basis points, 4 basis points above yesterday's close.
    The spread between five-year and 30-year yields
 rose to a high of 56 basis points, 4 basis points
higher than its last close.
    About the short end of the curve, Briggs said: “I think this
is more of a curve movement. (Short-dated bonds) are essentially
unchanged.” 
     The U.S. Treasury Department will kick off its 2018 coupon
auctions with a sale of $24 billion of three-year notes at 1
p.m. EST (1800 GMT). The agency is selling $56 billion in new
supply this week, with 10-year notes on Wednesday and 30-year
bonds on Thursday.
    The U.S. 10-year note yielded 2.515 percent at
9:36 a.m. EST (1436 GMT), the highest since March 17. The
benchmark government bond last closed at 2.482 percent.
    The two-year note, which is sensitive to traders'
views on Fed policy, yielded 1.956 percent at 9:31 a.m. EST
(1431GMT), near nine-year highs. The three-year note yield
, was 2.063 percent at 9:31 a.m. ET (1431 GMT), near
the decade high of 2.07 percent reached on Monday. 
    
    January 9 Tuesday 9:36 AM EST New York / 1436 GMT
                               Price                  
 US T BONDS MAR8               150-27/32    -0-28/32  
 10YR TNotes MAR8              123-64/256   -0-60/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.42         1.445     0.031
 Six-month bills               1.565        1.5994    -0.008
 Two-year note                 99-216/256   1.956     -0.004
 Three-year note               99-120/256   2.0626    0.003
 Five-year note                99-40/256    2.3055    0.019
 Seven-year note               98-208/256   2.4362    0.029
 10-year note                  97-176/256   2.5165    0.034
 30-year bond                  97-216/256   2.8578    0.043
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.50         1.00    
 spread                                               
 U.S. 3-year dollar swap        18.25         0.50    
 spread                                               
 U.S. 5-year dollar swap         3.75         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -21.00        -0.50    
 spread                                               
 






 (Reporting by Kate Duguid; Editing by Jeffrey Benkoe)
  
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