May 18, 2018 / 1:58 PM / 4 days ago

TREASURIES-U.S. 10-year yield retreats from 7-year peak

    * Traders see 3.25 pct as next test for 10-year yield
    * U.S. to sell $99 bln coupon issues, $16 bln floating-rate
notes

    By Richard Leong
    NEW YORK, May 18 (Reuters) - U.S. 10-year Treasury yields
declined on Friday from a near seven-year high as buyers emerged
following a bond market sell-off earlier this week spurred by
worries about growing inflation and government borrowing.
    Technical indicators suggested the Treasuries market is the
most oversold since three weeks ago, when the 10-year yield rose
above 3 percent for the first time since January 2014.
    Still many traders expect Treasury prices would resume their
fall, pushing 10-year yields toward 3.25 percent, which was last
seen in May 2011.
    "It's a grind higher in yields," said Larry Milstein, head
of government and agency trading at R.W. Pressprich & Co in New
York. "I think the data are still pretty good. They make people
think the economy is doing well."
    To be sure, if Wall Street unravels as investors view
Treasuries as a compelling alternative to stocks, or a resurgent
dollar hurts oil and other commodity prices, that could rekindle
a bid for U.S. government bonds, analysts said.
    At 9:48 a.m. ET (1348 GMT), the yield on benchmark 10-year
Treasury notes was down 2 basis points at 3.091
percent after touching 3.128 percent in overseas trading, which
was the highest level since July 2011, Reuters data showed.
    On the week, the 10-year yield was on track to increase 12
basis points, its biggest weekly gain in a month.
    The two-year Treasury yield was about 2 basis
points lower at 2.557 percent, pulling back from a nearly decade
peak of 2.598 percent reached on Thursday.
    The two-year yield was on course to rise for six straight
weeks, which would be the longest such streak since 10
consecutive weeks of increase in the fourth quarter of 2017.
    The yield on 30-year bonds touched 3.264 percent
earlier Friday, which was the highest since October 2014. It was
on track for its largest weekly rise since early February.
    Demand for Treasuries will be tested next week as the
Treasury Department is scheduled to sell $99 billion in
fixed-rate coupon issues and $16 billion in two-year
floating-rate notes (FRN).
May 18 Friday 9:50AM EDT/ 1350 GMT
                               Price                   
 US T BONDS JUN8               140-22/32    0-8/32     
 10YR TNotes JUN8              118-176/256  0-44/256   
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             1.87         1.9046     -0.002
 Six-month bills               2.0375       2.0868     0.000
 Two-year note                 99-168/256   2.5571     -0.016
 Three-year note               99-182/256   2.7264     -0.022
 Five-year note                99-70/256    2.9087     -0.023
 Seven-year note               98-248/256   3.0407     -0.022
 10-year note                  98-44/256    3.0892     -0.020
 30-year bond                  97-236/256   3.2338     -0.012
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        23.50        -1.00     
 spread                                                
 U.S. 3-year dollar swap        17.25        -1.00     
 spread                                                
 U.S. 5-year dollar swap         9.00        -0.75     
 spread                                                
 U.S. 10-year dollar swap        2.00        -1.00     
 spread                                                
 U.S. 30-year dollar swap       -9.75        -1.00     
 spread                                                
 

    
 (Reporting by Richard Leong
Editing by Nick Zieminski)
  
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