October 30, 2017 / 4:35 PM / a year ago

TREASURIES-Yields fall as Powell seen likely Fed chair pick

 (Recasts with Powell, adds quote, updates prices)
    * Data, Fed meeting, Fed chair announcement in focus
    * Treasury refunding watched for signs of new maturity

    By Karen Brettell
    NEW YORK, Oct 30 (Reuters) - U.S. Treasury yields fell on
Monday as news reports indicated that U.S. President Donald
Trump is likely to appoint Federal Reserve Governor Jerome
Powell, who is viewed as more dovish than other contenders, as
head of the Federal Reserve.
    A source familiar with the matter said on Monday that Powell
is likely to replace Janet Yellen. Trump is expected to announce
his choice on Thursday, a White House official said separately.
    “You are getting a bull steepener, which suggests that the
market is pricing in slightly fewer rate hikes, which would be
consistent with Powell,” said Gennadiy Goldberg, an interest
rate strategist at TD Securities in New York.
    So-called bull steepening is when shorter-term rates, which
are more sensitive to interest rate hikes, fall at a faster pace
than longer-term bond yields.
    The yield curve between five-year notes and 30-year bonds
               steepened to 90.50 basis points, up from 88.8
basis points on Friday.
    Benchmark 10-year notes             were last up 15/32 in
price to yield 2.37 percent, down from 2.43 percent on Friday.
    Bloomberg reported on Monday that lawmakers are considering
a five-year plan to gradually phase in corporate tax cuts, which
would have the rate reach 20 percent in 2022.
    Investors have hoped that near-term tax cuts would boost
economic growth.
    Bonds are expected to be volatile this week with numerous
catalysts driving activity including a heavy slate of economic
data, the Treasury Department’s refunding plans, a Fed meeting
and the expected Fed chair announcement.
    “It is a very busy week, (with) a lot of potentially
market-moving events already on the calendar,” said Thomas
Simons, a money market economist at Jefferies in New York.
    The main economic focus this week is Friday’s U.S. jobs
report for October.
    The Fed is expected to leave interest rates unchanged when
it concludes its two-day policy meeting on Wednesday, but
investors will be watching for any new indications that a rate
hike is likely in December.
    The Treasury Department is also due to announce its funding
needs for the next two quarters on Wednesday.
    Traders will be watching for any new indications that the
government may introduce a new long or ultra-long debt maturity
as it faces higher funding needs over the coming years.

 (Editing by Meredith Mazzilli)
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