November 9, 2017 / 3:36 PM / a month ago

TREASURIES-U.S. bond yields climb before 30-year bond sale

    * U.S. to sell $15 bln in 30-year bonds, final refunding leg
    * Investors await Senate bill on U.S. tax overhaul
    * U.S. yield curve steepens from flattest level in a decade

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Nov 9 (Reuters) - U.S. Treasury yields rose on
Thursday, with 10-year yields bouncing from near three-week
lows, as traders prepared for $15 billion worth of 30-year
bonds, the last part of this week's $64 billion November
refunding.
    The yield curve steepened a tad from its flattest level in a
decade as traders await the U.S. Senate version of a proposal to
rewrite the federal tax code, which might add significantly to
future government borrowing to finance possibly steep tax cuts.
    The Republican-backed bill from the Senate is expected to be
released later on Thursday, while the 30-year bond auction is
scheduled for 1 p.m. (1800 GMT).
    "For the auction we believe many will await their set-ups
until after details from Washington on taxes are released,"
Cantor Fitzgerald Treasury strategist Justin Lederer wrote in a
research note.
    At 10 a.m. (1500 GMT), the 10-year Treasury note yield
 traded at 2.331 percent, up 1 basis point from late
on Wednesday when it hit a near three-week trough of 2.304
percent.
    The 30-year bond yield rose 1.6 basis points to
2.800 percent, not far from a near six-week low of 2.765 percent
set on Tuesday. 
    The two-year yield was unchanged at 1.645
percent.  
    The yield spread between two-year and 10-year Treasuries
 hit a fresh decade-tight level of 65.9 basis points
earlier on Thursday, before steepening to 68.0 basis points,
Reuters data showed.
    Traders have favored longer-dated Treasuries over
shorter-dated issues over the past couple of weeks, as they
anticipate further rate increases from the Federal Reserve and
domestic inflation remaining below the Fed's 2 percent goal,
analysts said.
    Uncertainty about whether Republicans in Congress will pass
tax cuts and other changes to the U.S. tax code, and a
diminished likelihood that the government will introduce a
Treasury bond that matures beyond 30 years have made such
"curve-flattener" trades more appealing, they said.
    "What had lifted yields earlier had faded," said Stephen
Gallagher, head of U.S. research at Societe Generale in New
York.
  November 9 Thursday 10:08AM New York / 1508 GMT
                               Price                  
 US T BONDS DEC7               153-28/32    -0-15/32  
 10YR TNotes DEC7              125-40/256   -0-24/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.23         1.2509    0.026
 Six-month bills               1.33         1.3575    0.015
 Two-year note                 99-182/256   1.6495    0.005
 Three-year note               99-242/256   1.7688    0.006
 Five-year note                99-240/256   2.0132    0.011
 Seven-year note               100-76/256   2.2038    0.015
 10-year note                  99-64/256    2.3345    0.018
 30-year bond                  98-212/256   2.8082    0.024
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       68.40        -0.10     
 30-year vs 5-year yield       79.40        1.45      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.75         0.25    
 spread                                               
 U.S. 3-year dollar swap        18.00         0.50    
 spread                                               
 U.S. 5-year dollar swap         6.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.00         1.00    
 spread                                               
 U.S. 30-year dollar swap      -26.50         0.00    
 spread                                               
 
    

    
 (Reporting by Richard Leong, Editing by Rosalba O'Brien)
  

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