January 8, 2018 / 3:39 PM / 2 months ago

TREASURIES-U.S. bond prices gain ahead of auctions

    * Treasury to sell $56 bln supply this week
    * Stronger German debt helps U.S. bonds firm

    By Kate Duguid
    NEW YORK, Jan 8 - Treasury bond yields were modestly lower
on Monday after data on Friday showing an unexpectedly slower
growth in U.S. hiring for December, and before $56 billion in
new bond supply this week.
    Job growth slowed more than expected last month amid a
decline in retail employment, but a pick-up in monthly wage
gains pointed to labor market strength that could pave the way
for the Federal Reserve to increase interest rates in March.
    With Tokyo on holiday, trading volumes were low, and this
morning's moves were muted. Yields on U.S. government bonds
opened higher this morning before falling to rates hit late last
    Attention is now focused on new supply with the U.S.
Treasury Department to auction new three-year notes on Tuesday,
10-year notes on Wednesday and 30-year bonds on Thursday.
    Demand for three-year notes may be mixed given that the U.S.
central bank is expected to continue hiking interest rates. But
sales of long-term securities are expected to go well. 
    "Since 10-years seem to be firmly entrenched in that 2.40
percent to 2.50 percent area, I would think that should have a
tendency to garner some interest," Mary Anne Hurley, vice
president of fixed income at D.A. Davidson in Seattle. "As for
30-years, there’s lots of demand for longer-dated paper."
    The three-year yield, which is sensitive to
traders' views on Fed policy, rose as high as was 2.071 percent
on Monday, the highest since late 2007.
    The yield on the U.S. 10-year note was pulled to
a high of 2.489 percent before falling to 2.465 percent at 9:34
a.m. (1334 GMT). The benchmark government bond last closed at
2.476 percent.
    Stronger German bond yields also helped U.S. Treasuries firm
on Monday.
    “We’re up following German bunds (prices) higher,” said
January 8 Monday 9:41AM New York / 1441 GMT
 US T BONDS MAR8               152-5/32     0-11/32   
 10YR TNotes MAR8              123-152/256  0-20/256  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.3825       1.4063    0.002
 Six-month bills               1.5525       1.5862    -0.003
 Two-year note                 99-216/256   1.9559    -0.004
 Three-year note               99-126/256   2.0542    -0.003
 Five-year note                99-74/256    2.2769    -0.008
 Seven-year note               99-20/256    2.3943    -0.008
 10-year note                  98-32/256    2.4654    -0.011
 30-year bond                  99-40/256    2.7917    -0.018
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        18.75         0.50    
 U.S. 3-year dollar swap        18.25         0.25    
 U.S. 5-year dollar swap         4.00         0.00    
 U.S. 10-year dollar swap       -1.50        -0.50    
 U.S. 30-year dollar swap      -20.50        -0.25    
 (Reporting by Kate Duguid; Editing by Alistiar Bell)
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