January 3, 2018 / 2:56 PM / 5 months ago

TREASURIES-U.S. bond yields fall before ISM, FOMC minutes

    By Richard Leong
    NEW YORK, Jan 3 (Reuters) - U.S. Treasury yields slipped on
Wednesday in advance of data on domestic manufacturing activity
and minutes of last month's Federal Reserve meeting, where
policy makers decided to raise short-term interest rates for a
third time in 2017.
    Bond markets around the world rebounded from Tuesday's
selloff tied to hawkish comments from two European Central Bank
officials, which propelled the 10-year German Bund yield to a
two-month peak and the five-year U.S. yield
 to its highest level since April 2011.
    Some investors said Tuesday's yield rise was partly a
reversal of the drop linked to typical year-end buying.
    "A majority of yesterday's move was a move back of what
happened over the year-end holiday," said Jason Celente, senior
portfolio manager at Insight Investment in New York.
    At 9:27 a.m. (1437 GMT), benchmark 10-year Treasury yield
 was down 2 basis points at 2.443 percent, while the
two-year yield dipped 0.4 basis point to 1.919
percent, not far below a nine-year peak.
    Tuesday's yield spike also stemmed from bond dealers hedging
the slate of corporate bonds they underwrite this week, analysts
said.
    Companies are expected to sell $35 billion in
investment-grade corporate bonds this week, according to IFR, a
Thomson Reuters unit.
     Evidence of further expansion in the factory sector will
likely support the notion of steady U.S. economic growth,
perhaps allowing the Fed to increase rates up to three times in
2018.
    The Institute for Supply Management will release its January
report on manufacturing at 10 a.m. (1500 GMT).
    Analysts polled by Reuters forecast the ISM factory index
likely came in at 58.1 in December, little changed from 58.2 in
November.
    Investors are also awaiting clues on the path of future rate
hikes in the minutes of the Dec. 12-13 meeting of the Federal
Open Market Committee (FOMC). They hope the minutes, set for
release at 2 p.m. (1900 GMT), will provide a better sense of the
FOMC's view on business activity before the passage of the
biggest rewrite of the U.S. tax code in 30 years. 
    "They want to know what the Fed was thinking about before
tax reform was passed," Celente said.
  January 3 Wednesday 9:44AM New York / 1444 GMT
                               Price                  
 US T BONDS MAR8               152-10/32    18/32     
 10YR TNotes MAR8              123-220/256  6/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.3875       1.4117    -0.035
 Six-month bills               1.5575       1.5917    -0.018
 Two-year note                 99-234/256   1.9192    -0.004
 Three-year note               99-164/256   2.0011    -0.014
 Five-year note                99-122/256   2.2364    -0.014
 Seven-year note               99-76/256    2.3597    -0.022
 10-year note                  98-80/256    2.4434    -0.022
 30-year bond                  99-68/256    2.7863    -0.024
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       52.30        -1.75     
 30-year vs 5-year yield       55.00        -1.60     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        17.75        -0.50    
 spread                                               
 U.S. 3-year dollar swap        18.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap         3.00        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.50        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -21.75        -0.25    
 spread                                               
 
    
 (Reporting by Richard Leong; Editing by David Gregorio)
  
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