November 5, 2018 / 2:17 PM / 8 days ago

TREASURIES-U.S. bond yields slip before 3-year auction

    * U.S. kicks off November refunding with 3-year debt note
    * Traders wary ahead of U.S. Congressional elections
    * U.S. 30-year yield hovers near four-plus year high
    * 

    By Richard Leong
    NEW YORK, Nov 5 (Reuters) - U.S. Treasury yields fell on
Monday as traders braced for $83 billion worth of government
debt supply tied to the November refunding this week and awaited
the outcome of the U.S. congressional elections on Tuesday.
    Lower global stock prices and recent oil market weakness
offset an upbeat October U.S. payrolls report on Friday and
uneasiness about growing federal borrowing, analysts said.

    Investors also will seek clues about the Federal Reserve's
view on future interest rate increases when policymakers meet on
Wednesday and Thursday.
    "Markets this morning are cautious and slow despite
overnight declines in Asian stocks and continued stagnation in
crude oil," said Jim Vogel, an interest rates strategist at FTN
Financial.
    At 8:49 a.m. (1349 GMT), the yield on benchmark 10-year
Treasury notes was more than 1 basis point lower at
3.197 percent.
    The 30-year bond yield dipped 1.2 basis points
to 3.442 percent after on Friday touching 3.464 percent, which
was the highest since July 2014. 
    The two-year yield slipped 0.5 basis point at
2.907 percent after hitting 2.920 percent on Friday, a level not
seen June 2008. 
    At 1 p.m. EST (1800 GMT), the Treasury will sell $37 billion
of three-year notes, the first leg of the government's quarterly
refunding that is expected to raise $28.7 billion in new cash to
fund the federal deficit.
    Analysts expected solid demand for the latest three-year
supply, which is the most since May 2010, but were cautious
about bidding for the record amounts of 10-year and 30-year
offerings later this week.
    In "when-issue" activity, traders expected the latest
three-year issue to sell at a yield of 2.979 percent
, just below a near 11-1/2 year high set at the
three-year auction in October.
    Declining purchases from overseas central banks, together
with rising hedging costs, are risks for the longer-dated
auctions.
    On the other hand, data suggested speculators pared their
bearish bets on 10-year Treasuries last week, while asset
managers built record bullish positions in 10-year T-note
futures, Commodity Futures Trading Commission data released on
late Friday showed.
    The U.S. elections on Tuesday will determine whether 
Democrats wrest one or both of the two chambers of Congress from
Republicans.
    If Democrats win control of the House of Representatives, as
many polls are indicating, analysts anticipate further gridlock
that will not yield any fiscal legislations such as the massive
tax cuts enacted last December.
    The latest polls also showed Republicans will likely retain
their majority in the Senate. 
 November 5 Monday 8:51AM New York / 1351 GMT
                               Price                  
 US T BONDS DEC8               137-14/32    9/32      
 10YR TNotes DEC8              118-40/256   4/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.2825       2.3269    0.000
 Six-month bills               2.435        2.4987    0.000
 Two-year note                 99-240/256   2.9075    -0.004
 Three-year note               99-186/256   2.9724    -0.006
 Five-year note                99-80/256    3.0246    -0.013
 Seven-year note               99-72/256    3.1153    -0.018
 10-year note                  97-76/256    3.1989    -0.015
 30-year bond                  91-216/256   3.4397    -0.014
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       29.00        -1.50     
 30-year vs 5-year yield       41.40        -0.55     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.75        -0.50    
 spread                                               
 U.S. 3-year dollar swap        17.75        -0.75    
 spread                                               
 U.S. 5-year dollar swap        14.25         0.00    
 spread                                               
 U.S. 10-year dollar swap        5.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -12.00         0.00    
 spread                                               
 

    
 (Reporting by Richard Leong; Editing by Jeffrey Benkoe)
  
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