January 23, 2018 / 3:34 PM / 3 months ago

TREASURIES-Yields fall, tracking Japanese govt bonds, after BoJ decision

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 23 (Reuters) - U.S. Treasury debt yields slid
on Tuesday, in line with declines in Japanese government bond
yields, after the Bank of Japan kept interest rate targets
unchanged and its top official quashed speculation of a move
away from an easy monetary policy.
    Benchmark U.S. 10-year yields, which move inversely to
prices, fell for the first time in five days, while those on
30-year bonds sank to a one-week low. 
    In Japan, the cash 10-year Japanese government bond yield
dipped to 0.070 percent, slipping further from a
six-month high of 0.090 percent set last week.
    JGB yields fells after BoJ Governor Haruhiko Kuroda said he
saw no immediate need to raise interest rates or slow the bank's
regular purchases of exchange-traded funds - one of its stimulus
measures - despite criticism the buying was artificially
inflating Tokyo stock prices.
    "This rally in Treasury prices is coming from overseas,
especially the comments from the BoJ that they will keep policy
accommodative," said Subadra Rajappa, head of U.S. rates
strategy at Societe Generale in New York.
    In mid-morning trading, U.S. 10-year Treasury note yields
 fell to 2.620 percent, from 2.663 percent late on
Monday. 
    U.S. 30-year bond yields, meanwhile, hit a one-week low of
dropped to a one-week low of 2.879 percent an was
last at 2.884 percent, down from Monay's 2.927 percent.
    U.S. 2-year note yields were also down, trading at 2.052
percent. 
    Societe's Rajappa said the central banks are in focus this
week with the recently concluded BoJ meeting, and the upcoming
policy decisions of the European Central Bank later this week,
as well as the Federal Reserve next week.
    The Fed is not expected to raise interest rates next week,
as investors priced in a rate hike in March. 
    The market though was more focused on the ECB.
    "Both the ECB and the BoJ are stuck between a rock and a
hard place," said Rajappa "If they sound too hawkish, then their
currencies start to appreciate and it kind of hurts their
ability to make progress on the inflation front."
    When central banks push back from their initial hawkish
rhetoric, then the market starts stabilizing, causing a rally in
prices such as what has been happening on Tuesday, she added.
    Also later on Tuesday, the U.S. Treasury auctions
$26-billion in 2-year notes.
    
      January 23 Tuesday 10:19AM New York / 1519 GMT
                               Price                  
 US T BONDS MAR8               149-15/32    0-25/32   
 10YR TNotes MAR8              122-108/256  0-84/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.4275       1.4526    -0.005
 Six-month bills               1.6025       1.638     -0.010
 Two-year note                 99-168/256   2.0569    -0.016
 Three-year note               99-120/256   2.1853    -0.025
 Five-year note                98-158/256   2.4239    -0.037
 Seven-year note               98-24/256    2.5516    -0.041
 10-year note                  96-208/256   2.6205    -0.043
 30-year bond                  97-72/256    2.8865    -0.041
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.75        -0.25    
 spread                                               
 U.S. 3-year dollar swap        19.00        -0.50    
 spread                                               
 U.S. 5-year dollar swap         7.00         0.00    
 spread                                               
 U.S. 10-year dollar swap        3.25        -1.00    
 spread                                               
 U.S. 30-year dollar swap      -12.50        -1.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette
Baum)
  
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