March 27, 2018 / 7:40 PM / in 7 months

TREASURIES-U.S. bond market rallies on stock losses, quarter-end buying

    * U.S. to sell $29 bln 7-year notes, $15 bln 2-year FRNs
Wednesday
    * Investors digest 85 pct of this week's record supply 
    * U.S. consumer confidence unexpectedly falls in March
    * Investors most upbeat on Treasuries since June -JPMorgan

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, March 27 (Reuters) - U.S. Treasury yields fell on
Tuesday with 10-year yield hitting six-week lows as fund
managers purchased bonds to rebalance their portfolios for
quarter-end, offsetting sales to make room for the record high
$294 billion in government debt this week.
    A sharp negative turn on Wall Street, which wiped out its
earlier gains, kindled safe-haven demand for bonds.
    The U.S. Treasury Department sold $65 billion in one-month
bills; $24 billion in one-year T-bills
 and $35 billion in five-year notes
to average demand. The auctions on Monday and Tuesday were
equivalent to 85 percent of the scheduled Treasuries supply this
week.
    "There is the cash out there for these issues," said John
Canavan, market strategist at Stone & McCarthy Research
Associates in New York.
    Canavan said he expected solid bidding for $29 billion of
seven-year notes and $15 billion in two-year
floating-rate notes on Wednesday. 
    Lingering worries about a trade war between the United
States and China have supported safe-haven demand for
Treasuries, though Wall Street stock prices initially rose for a
second day on Tuesday following last week's plunge tied to fears
about an escalation of trade barriers between the world's two
biggest economies.
    "Despite today’s stock market rebound, 'flight-to-quality'
sentiment may still linger given market concerns over trade
policies, which could be supportive for demand," analysts at
Nomura Securities International wrote in a research note.
    The share of investors who are bullish on longer-dated
Treasuries rose to its highest level since last June, a survey
from JPMorgan released on Tuesday showed.
    The $14.7 trillion Treasury sector was on track to generate
about a 0.4 percent total return in March, bouncing back from
two straight months of losses, according to an index compiled by
Barclays and Bloomberg.
    Moreover, the Conference Board said its gauge of U.S.
consumer confidence unexpectedly fell to 127.7 in March from a
revised 130.0 in February. This raised some worries about
consumer spending in the first quarter, analysts said.

    The yield on 10-year Treasury notes was down 5.9
basis points to 2.783 percent after touching its lowest level
since Feb. 9.
   Two-year yields were down 4.2 basis points to
2.274 percent, while the yield on 30-year Treasury bonds
 touched a near seven-week low and was last down 4.3
basis points to 3.028 percent.
    On Wall Street, the three major stock indexes
 turned negative in afternoon trading, dragged down by
technology shares. 
    The U.S. bond market will close early at 2 p.m. (1800 GMT)
on Thursday and shut for the Good Friday holiday.
March 27 Tuesday 3:09PM New York / 1909 GMT
                               Price                   
 US T BONDS JUN8               145-23/32    1          
 10YR TNotes JUN8              120-248/256  0-128/256  
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             1.7425       1.7746     -0.020
 Six-month bills               1.8875       1.9322     -0.013
 Two-year note                 99-246/256   2.2701     -0.046
 Three-year note               99-246/256   2.3886     -0.049
 Five-year note                100-58/256   2.5755     -0.057
 Seven-year note               100-76/256   2.7025     -0.066
 10-year note                  99-192/256   2.7789     -0.062
 30-year bond                  99-128/256   3.0254     -0.046
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        27.75        -6.50     
 spread                                                
 U.S. 3-year dollar swap        25.00        -1.75     
 spread                                                
 U.S. 5-year dollar swap        13.25        -1.50     
 spread                                                
 U.S. 10-year dollar swap        2.00        -1.25     
 spread                                                
 U.S. 30-year dollar swap      -16.75        -1.50     
 spread                                                
 

    
 (Reporting by Richard Leong; Editing by Dan Grebler and Chizu
Nomiyama)
  
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