January 30, 2018 / 4:00 PM / 10 months ago

TREASURIES-Long-dated yields gain before Fed decision, other events

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 30 (Reuters) - U.S. Treasury long-dated yields
rose on Tuesday in choppy trading ahead of a slew of events this
week such as a Federal Reserve monetary policy decision which
could help shed more light on the outlook for interest rates
this year.
    U.S. benchmark 10-year yields, which move inversely to
prices, touched their strongest level in nearly four years,
while 30-year yields climbed to their highest since May 2017. 
    Gennadiy Goldberg, interest rates strategist, at TD
Securities in New York said, investors were initially spooked by
declines on Wall Street overnight and on Tuesday, earlier
prompting a flight to the safety of U.S. government bonds.
    But he said the Treasuries price rally has since tapered off
as investors positioned for several crucial events led by
President Donald Trump's first State of the Union address to
Congress later on Tuesday, the Fed statement on Wednesday, and
the impending U.S. non-farm payrolls report for January.
    Trump is expected to take credit for U.S. economic gains in
the past year as well as tout the benefits of a tax overhaul
approved by the Republican-controlled Congress in December. He
could also announce some infrastructure spending ahead.

    The Fed will be a big focus this week, with some analysts
expecting a hawkish tone from the U.S. central bank.
    "The Fed could still price a great deal more into the
front-end and the belly if it chose to do so," said Ian Lyngen,
head of U.S. rates strategy at BMO Capital Markets in New York,
referring to the short- and medium-term debt.
    "We are currently pricing roughly 65 basis points (of rate
hikes) into 2018," he added.
    In mid-morning trading, benchmark U.S. 10-year note yields
 edged up to 2.712 percent, from Monday's 2.699
percent. Overnight, 10-year yields hit 2.733 percent, the
highest since April 2014.
    U.S. 30-year bond yields also rose to 2.973 percent
, up from 2.943 percent late on Monday. The yield on
this maturity touched an 8-1/2-month peak of 2.989 percent
earlier in the session.
    U.S. 2-year yields, meanwhile, were slightly down at 2.116
percent, from Monday's 2.124 percent.
    The yield curve has steepened, with the spread between
five-year and 30-year yields widening to 47.80 basis points
.
    The gap between U.S. 2-year and 10-year yields rose to 58.10
basis points, the widest in three weeks.
    TD's Goldberg said Tuesday's steepening was just a reversal
of a generally flattening trend in the last couple of weeks,
with investors taking profits on those trades.
    
      January 30 Tuesday 10:46AM New York / 1546 GMT
                               Price                  
 US T BONDS MAR8               147-21/32    -0-15/32  
 10YR TNotes MAR8              121-196/256  -0-12/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.425        1.4501    -0.003
 Six-month bills               1.6275       1.6638    -0.005
 Two-year note                 99-196/256   2.1203    -0.004
 Three-year note               99-72/256    2.2525    -0.005
 Five-year note                99-114/256   2.4937    -0.003
 Seven-year note               99-36/256    2.6352    0.002
 10-year note                  96-16/256    2.7105    0.012
 30-year bond                  95-172/256   2.9698    0.027
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.25         0.50    
 spread                                               
 U.S. 3-year dollar swap        18.75         0.75    
 spread                                               
 U.S. 5-year dollar swap         7.25         0.50    
 spread                                               
 U.S. 10-year dollar swap        2.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -14.50        -0.25    
 spread                                               
 
 (Editing by Bernadette Baum)
  
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