April 16, 2018 / 2:33 PM / 5 months ago

TREASURIES-Muted demand for U.S. safe-haven bonds as Syria fears wane

    By Kate Duguid
    NEW YORK, April 16 (Reuters) - Prices on Treasury bonds, a
global safe-haven investment, fell on Monday as demand remained
muted, suggesting the market has grown less concerned about
possible retaliation for the U.S.-led air strikes in Syria on
Saturday.
    Yields, which move inversely to prices, rose overnight and
through Monday morning, despite the weekend's turmoil in which
U.S., British and French forces fired more than 100 missiles on
Syria. 
    "You'd think ex-ante some of these geopolitical risks that
we've seen recently would be more supportive of Treasuries
generally," said Jonathan Cohn, interest rate strategist at
Credit Suisse in New York. "But one could suppose that markets
are discounting the possibility of further escalation in the
U.S.-Russia-Syria conflict." 
    The strike, the biggest intervention by Western powers
against Syrian President Bashar al-Assad, was a response to a
poison gas attack that killed dozens.
    The yield on the 10-year benchmark government bond
 rose to 2.851 percent from its last close at 2.828.
This steepened the yield curve slightly from Friday when it
hovered at its lowest in over a decade as short-dated yields
rose on expectations of further U.S. interest rate hikes from
the Federal Reserve. 
    On Monday, the two-year Treasury yield rose to an
intra-day high of 2.394 percent, its highest in nearly a decade,
on the view the U.S.-led strike would not escalate. Market
analysts also cited technical factors.
    "One thing we see with clients is that anytime you get the
10-year back to 2.85 to 2.90 percent, there tends to be buying.
And then, anytime you get close to 2.75, we start to see some
selling," said Tom di Galoma, managing director at Seaport
Global Holdings in Memphis, Tennessee.
    The 10-year yield has not risen above 3.0 percent since
January of 2014.  
    Gains on Wall Street also pressured the bond market. The Dow
Jones Industrial Average edged up 0.6 percent while the
S&P 500 Index was up 0.4 percent. 
    "Rates have been trading around equities more than some
fundamental drivers that we had been highlighting earlier this
year," said Cohn.  
    U.S. Commerce Department data showed retail sales in March
rose 0.6 percent, after three months of declines. Di Galoma
noted that "Retail sales has been a volatile number with the
weather," with cold temperatures keeping shoppers away from
stores. 

April 16 Monday 10:17AM New York / 1417 GMT
                               Price                  
 US T BONDS JUN8               145-5/32     -0-8/32   
 10YR TNotes JUN8              120-92/256   -0-32/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.74         1.7715    0.013
 Six-month bills               1.9275       1.973     0.013
 Two-year note                 99-190/256   2.3856    0.017
 Three-year note               99-144/256   2.5276    0.020
 Five-year note                99-30/256    2.6914    0.015
 Seven-year note               98-236/256   2.7966    0.018
 10-year note                  99-48/256    2.8451    0.017
 30-year bond                  99-32/256    3.0447    0.009
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        30.75        -0.75    
 spread                                               
 U.S. 3-year dollar swap        24.25        -0.75    
 spread                                               
 U.S. 5-year dollar swap        12.75        -0.50    
 spread                                               
 U.S. 10-year dollar swap        3.00        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -13.75        -0.50    
 spread                                               
 
 (Reporting by Kate Duguid; Editing by David Gregorio)
  
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