July 5, 2018 / 1:55 PM / 5 months ago

TREASURIES-U.S. yield curve near 11-year low before FOMC minutes

    * Traders eye clues on U.S. rate hikes in FOMC minutes
    * ADP, jobless claims data hint at solid U.S. labor market

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, July 5 (Reuters) - The U.S. yield curve reached
its flattest level in about 11 years on Thursday ahead of the
Federal Reserve's release of the minutes of its June 12-13
meeting, where it hinted at the probability of raising
short-term interest rates twice more in 2018.
    Treasury yields were narrowly mixed from Tuesday as some
investors trimmed their bond holdings and stepped back into
stocks following reassuring economic data from Germany and on
hopes the Trump administration may back away from slapping
tariffs on European-made cars.
    U.S. financial markets were closed on Wednesday for the U.S.
Independence Day holiday.
    Still, traders were cautious in making big changes to their
bond positions in advance of the Fed minutes and the
government's June payrolls report due at 8:30 a.m. (1230 GMT) on
Friday.
    "No one wants to trade too many bonds this week until they
see major data that depict what is happening with the underlying
economy," said Jim Vogel, interest rates strategist at FTN
Financial in Memphis, Tennessee.
    If the minutes were to show policymakers are leaning toward
further rate hikes amid risks from escalating trade friction,
investors may pile into more curve-flattening positions,
analysts said.
    A curve-flattener is profitable if shorter-term yields rise
more quickly than longer-term yields.
    The Fed will release its June meeting minutes at 2 p.m.
(1800 GMT) on Thursday.
    More job growth and a decline in unemployment will likely
support more rate hikes from the Fed, analysts said. 
    The spread between five-year and 30-year Treasury yields
 hit 22.20 basis points, the tightest since July
2007, while the gap between two-year and 10-year yields
 touched 29.00 basis points, the narrowest since
August 2007, Reuters data showed.
    At 9:40 a.m. (1331 GMT), the yield on benchmark 10-year
Treasury notes was 2.836 percent, flat from late on
Tuesday.
    Thursday's economic reports signaled the U.S. labor market
remains tight, which may allow the Fed to raise interest rates
further.
    The ADP National Employment Report showed private employers
hired 177,000 workers in June, fewer than the 190,000 increase
analysts had forecast. 
    The Labor Department said first-time filings for jobless
benefits unexpectedly grew by 3,000 to a seasonally adjusted
231,000 for the week ended June 30.
July 5 Thursday 9:36AM New York / 1336 GMT
                               Price                  
 US T BONDS SEP8               145-13/32    2/32      
 10YR TNotes SEP8              120-76/256   -1/32     
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.925        1.9612    -0.018
 Six-month bills               2.065        2.1156    0.000
 Two-year note                 99-236/256   2.5405    0.008
 Three-year note               99-250/256   2.633     0.008
 Five-year note                99-128/256   2.7329    0.003
 Seven-year note               99-172/256   2.802     0.000
 10-year note                  100-80/256   2.8382    0.000
 30-year bond                  103-64/256   2.9602    -0.006
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       29.50        -0.75     
 30-year vs 5-year yield       22.80        -0.90     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        26.00        -1.25    
 spread                                               
 U.S. 3-year dollar swap        23.25        -1.25    
 spread                                               
 U.S. 5-year dollar swap        15.25         0.00    
 spread                                               
 U.S. 10-year dollar swap        7.50         0.25    
 spread                                               
 U.S. 30-year dollar swap       -5.25         0.75    
 spread                                               
 
    
 (Reporting by Richard Leong; Editing by Dan Grebler)
  
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