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TREASURIES-U.S. yields rise before Yellen speech, two-year supply
September 26, 2017 / 4:10 PM / a month ago

TREASURIES-U.S. yields rise before Yellen speech, two-year supply

    * U.S. to sell $26 bln two-year notes at 1 p.m. (1700 GMT)
    * Fed's Yellen to speak at 12:45 p.m. (1645 GMT)
    * Trump offers hints on tax plan, raises borrowing concerns

 (New throughout, updates prices, market activity and comments)
    By Richard Leong
    NEW YORK, Sept 26 (Reuters) - U.S. Treasury yields rose on
Tuesday ahead of a speech by Federal Reserve Chair Janet Yellen
and a $26 billion sale of two-year notes, which kicks off this
week's $88 billion short- and medium-dated government debt
supply.
    Traders were waiting to hear whether Yellen will reinforce
the notion the central bank will consider raising rates at its
Dec. 12-13 policy meeting even as inflation remains below its
2-percent goal, analysts said.
    "It seems unlikely that Chair Yellen’s tone and core views
will have changed dramatically from Wednesday’s FOMC press
conference," NatWest strategists wrote in a research note.
    Investors were also preparing for the upcoming supply of
two-year Treasuries at 1 p.m. (1700 GMT).
    Yellen is scheduled to speak at 12:45 p.m. (1645 GMT) about
"Inflation, Uncertainty, and Monetary Policy" at the National
Association for Business Economics' annual conference in
Cleveland.
    Last Wednesday, the policy making Federal Open Market
Committee left the door open for another rate increase in
December and said it will begin to reduce its $4.5 trillion
balance sheet in October.
    The rise in U.S. yields was stoked further by remarks from
U.S. President Donald Trump who said and lawmakers were working
to pass a big tax cut for the middle class. Traders had no
details on the plan, but speculated it might raise the federal
deficit and increase government borrowing.
    "It should be positive for risky assets and negative for
Treasuries," said Larry Milstein, head of government and agency
trading at R.W. Pressprich & Co. in New York. "Frankly, there is
a lot of skepticism until we see the details."
    At 11:49 a.m. (1549 GMT), the yield on benchmark 10-year
Treasury notes was up nearly 2 basis points at 2.237
percent, while the 30-year bond yield increased over
2 basis points to 2.782 percent.
    Bond yields declined on Monday on safe-haven demand due to
tensions between North Korea and the United States and surging
support for the far right in Sunday's German election.
    Several other Fed officials are set to speak publicly,
including Fed Governor Lael Brainard, Cleveland Fed President
Loretta Mester and Atlanta Fed President Raphael Bostic.

    In "when-issue" activity, traders expected the two-year note
issue to sell at a yield of 1.458 percent, which
would be highest yield since October 2008, Tradeweb data showed.
  September 26 Tuesday 11:51AM New York / 1551 GMT
                               Price                  
 US T BONDS DEC7               154-17/32    -0-12/32  
 10YR TNotes DEC7              125-240/256  -0-32/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.05         1.0674    0.043
 Six-month bills               1.1675       1.1908    0.000
 Two-year note                 99-162/256   1.4439    0.017
 Three-year note               99-108/256   1.5751    0.016
 Five-year note                98-236/256   1.8549    0.019
 Seven-year note               98-180/256   2.0769    0.017
 10-year note                  100-28/256   2.2375    0.017
 30-year bond                  99-92/256    2.7816    0.023
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        26.00        -0.50    
 spread                                               
 U.S. 3-year dollar swap        22.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap         8.00        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -4.25        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -32.50        -0.50    
 spread                                               
 
 (Reporting by Richard Leong; Editing by Susan Thomas and David
Gregorio)
  
 

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