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TREASURIES-U.S. yields rise as tax plan spurs borrowing concerns
September 28, 2017 / 3:08 PM / 24 days ago

TREASURIES-U.S. yields rise as tax plan spurs borrowing concerns

    * U.S. to sell $28 bln seven-year notes at 1 p.m.
    * U.S. 10-year yield breaks above 200-day moving average
    * U.S. 2-year yield subsides from near nine-year high

    By Richard Leong
    NEW YORK, Sept 28 (Reuters) - Most U.S. Treasury yields rose
on Thursday, with the 10-year yield hitting an 11-week peak as
investors reduced their bond holdings in the wake of a tax plan
that raised concerns about growth in the federal deficit and
borrowing.
    The sharp rise in bond yields came as the government
prepared to sell $28 billion in seven-year notes
at 1 p.m. (1700 GMT) in the final part of this week's $88 billon
fixed-rate debt supply.
    "The tax cut plan has added to the idea of fiscal stimulus
and an increase in Treasury issuance," said John Canavan, market
strategist at Stone & McCarthy Research Associates in New York.
    On Wednesday, President Donald Trump proposed steep tax cuts
for most Americans and businesses, but provided scant details on
how to offset them without adding to the country's $20 trillion
in national debt.
    At 10:55 a.m. (1455 GMT), the yield on 10-year Treasury
notes was 2.337 percent, up 3 basis points from late
on Wednesday. It reached 2.359 percent earlier on Thursday, the
highest since July 13, and traded above its 200-day moving
average for the first time since Aug. 1, Reuters data showed.
    On the other hand, the two-year yield retreated
from near nine-year highs tied to bets the Federal Reserve would
raise short-term interest rates in December. It was last at
1.471 percent, down 1.1 basis points after hitting 1.499 percent
earlier on Thursday.
    On Tuesday, Fed Chair Janet Yellen said the U.S. central
bank is on track to raise rates further even as inflation
remains below its 2 percent goal.
    Federal funds futures implied traders saw a 78 percent
chance the Fed would raise rates at its Dec. 12-13 policy
meeting, little changed from Wednesday, according
to CME Group's FedWatch program.
    In "when-issue" activity, traders expected the latest
seven-year Treasury issue to sell at a yield of 2.168 percent,
which would be the highest yield at a seven-year note sale since
March, according to Tradeweb.
  September 28 Thursday 10:57AM New York / 1457 GMT
                               Price                  
 US T BONDS DEC7               152-9/32     -0-21/32  
 10YR TNotes DEC7              125-88/256   -0-24/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.045        1.0623    -0.003
 Six-month bills               1.17         1.1933    -0.003
 Two-year note                 99-208/256   1.4707    -0.011
 Three-year note               99-90/256    1.6       -0.005
 Five-year note                99-200/256   1.9211    0.002
 Seven-year note               98-56/256    2.1533    0.015
 10-year note                  99-68/256    2.3335    0.024
 30-year bond                  97-40/256    2.8927    0.031
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        25.50         0.75    
 spread                                               
 U.S. 3-year dollar swap        23.50         0.00    
 spread                                               
 U.S. 5-year dollar swap         7.50        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -4.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -33.00         0.25    
 spread                                               
 
    

 (Reporting by Richard Leong; Editing by Dan Grebler)
  
 

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