October 30, 2017 / 8:50 PM / a year ago

TREASURIES-Yields fall as Powell seen likely Fed chair pick

    * Data, Fed meeting, Fed chair announcement in focus
    * Treasury's Mnuchin sees low demand for ultra-long bonds

 (Adds New York Times report; updates prices, table)
    By Karen Brettell
    NEW YORK, Oct 30 (Reuters) - U.S. Treasury debt yields fell
on Monday on news reports 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.

    The New York Times also reported on Monday that Powell was 
expected to be named Fed chairman on Thursday.
    “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 as high as 90.50 basis points, up from
88.8 basis points on Friday.
    Benchmark 10-year notes gained 17/32 in price to
yield 2.366 percent, down from 2.43 percent on Friday.
    Thirty-year bond yields fell to their lowest in
a week, reversing the earlier yield curve steepening, after
Bloomberg quoted Treasury Secretary Steven Mnuchin saying the
government does not see a lot of demand for ultra-long bonds. 
    Mnuchin added the Treasury will continue to monitor demand
for the debt.
    Some analysts have expected the government to introduce a
new ultra-long debt maturity as its funding needs increase.
    Bonds are expected to be volatile this week with numerous
market catalysts 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.
    The Treasury Department is due to announce its funding needs
for the next two quarters on Wednesday.
      October 30 Monday 4:15PM New York / 2015 GMT
 US T BONDS DEC7               152-13/32    1-7/32    
 10YR TNotes DEC7              125-12/256   0-116/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.085        1.1029    0.003
 Six-month bills               1.235        1.2598    -0.010
 Two-year note                 99-218/256   1.5757    -0.027
 Three-year note               99-204/256   1.6956    -0.035
 Five-year note                100-8/256    1.9934    -0.050
 Seven-year note               100-60/256   2.2137    -0.058
 10-year note                  98-252/256   2.3666    -0.061
 30-year bond                  97-112/256   2.8786    -0.058
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        22.50        -0.25    
 U.S. 3-year dollar swap        22.00        -0.25    
 U.S. 5-year dollar swap         7.50         0.25    
 U.S. 10-year dollar swap       -2.50         0.50    
 U.S. 30-year dollar swap      -29.00         0.75    
 (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
Nick Zieminski and Chris Reese)
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