October 19, 2018 / 3:57 PM / a month ago

TREASURIES-U.S. yields rise; selling spurred by Wall Street gains, hopes for Italy

    * Wall Street rebounds after sharp losses on Thursday
    * Italian yields fall on EU Moscovici's remarks
    * U.S. to sell $108 bln in fixed-rate debt next week
    * U.S. existing home sales for sixth straight month

 (New throughout, updates prices, yields, market activity and
comments)
    By Richard Leong
    NEW YORK, Oct 19 (Reuters) - U.S. Treasury yields rose on
Friday, with the 10-year yield hovering near a one-week high as
traders pared safe-haven bond positions on a recovery in Wall
Street stocks and hopes for reduced tension between Italy and
the European Commission.
    Major U.S. stock indexes rose as strong corporate earnings
offset worries about rising borrowing costs, U.S.-China trade
tensions and strained relations between United States and Saudi
Arabia.
    On Thursday, Wall Street share prices tumbled partly on
disappointing results from industrial companies. Kevin Giddis,
head of fixed income capital markets with Raymond James in
Memphis, Tennessee, said that despite Friday's rebound on Wall
Street, investors remain on edge which could spur more bond
buying in the near future.
    "The story of fear seems to be in place right now as
investors fear not only interest rates and the Fed, they are now
fearing forward earnings," said Kevin Giddis, head of fixed
income capital markets with Raymond James in Memphis, Tennessee.
    Yields on Italian government debt
fell after European Economic Affairs Commissioner Pierre
Moscovici said he wanted to reduce tensions with Italy over the
country's contentious budget plans. The drop in Italian yields
helped raise yields on U.S. and German debt.
    At 11:25 a.m. EDT (1525 GMT), benchmark 10-year Treasury
yield yield was 3.196 percent, up 2 basis point from
Thursday when it reached a one-week peak of 3.179 percent. Last
week, it reached a 7-1/2 year peak of 3.261 percent.
    The Dow was up 0.49 percent and the S&P 500
was up 0.59 percent.
    The Treasury market was roiled this week after the Federal
Reserve released minutes on its Sept. 25-26 policy meeting.
 Central bankers raised borrowing costs a quarter
point, and analysts said some traders dumped interest rate
futures after the minutes suggested some policy makers were open
to raising short-term interest rates above the "neutral" level
of 3 percent.
    Technical indicators suggest Treasuries are oversold, but 
the market faces supply pressure next week due to a planned
auction of a combined $108 billion in two-year, five-year and
seven-year fixed-rate U.S. government debt.
    "What I do know is that the bond market is somewhat
oversold, but it may not find many buyers until more data is
released, a geopolitical event gets our attention, or the Fed
changes its view on forward monetary policy," Giddis said.
    Earlier Friday, the National Association of Realtors said
U.S. home resales fell in September for a sixth straight months.

October 19 Friday 11:26AM EDT/ 1526 GMT
                               Price                   
 US T BONDS DEC8               137-27/32    -0-9/32    
 10YR TNotes DEC8              117-252/256  -0-40/256  
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             2.265        2.3091     -0.001
 Six-month bills               2.41         2.4729     0.007
 Two-year note                 99-184/256   2.8996     0.026
 Three-year note               99-180/256   2.9797     0.023
 Five-year note                99-52/256    3.0498     0.026
 Seven-year note               99-44/256    3.1335     0.021
 10-year note                  97-80/256    3.1958     0.021
 30-year bond                  92-248/256   3.3758     0.018
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        21.00        -1.50     
 spread                                                
 U.S. 3-year dollar swap        19.00        -1.00     
 spread                                                
 U.S. 5-year dollar swap        14.50        -0.50     
 spread                                                
 U.S. 10-year dollar swap        6.50        -0.25     
 spread                                                
 U.S. 30-year dollar swap       -8.25         0.25     
 spread                                                
 
    
 (Reporting by Richard Leong; Editing by David Gregorio)
  
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