April 11, 2018 / 1:39 PM / 8 months ago

TREASURIES-Yields slide on U.S. threat of Syria attack

    * U.S. CPI falls, but core rises; neutral impact on yields
    * Possible U.S. action in Syria weighs on yields
    * Focus on U.S. 10-year note auction

 (Adds details, comment, byline, table, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 11 (Reuters) - U.S. Treasury yields tumbled
on Wednesday, weighed by geopolitical concerns as the
administration of President Donald Trump warned of possible
military action against Syria following a suspected poison gas
attack.
    U.S. benchmark 10-year note and 30-year bond yields, which
move inversely to prices, slid to one-week lows, while 2-year
yields fell after two days of gains.
    Data showing a rise in U.S. core inflation for March, which
was up 0.2 percent and matched February's increase rise, failed
to boost yields, as headline consumer prices fell for the first
time in 10 months.
    "CPI (consumer price index) or any other economic data
release is a back-burner item when you have so much
geo-political risk on the forefront," said Tom di Galoma,
managing director at Seaport Global Holdings in New York.
    "The market is up-ticking price-wise as accounts choose to
cover duration shorts and add to longs ahead of the possibility
of...US bombing strikes in Syria," he added.
    Trump declared on Wednesday that missiles "will be coming,"
as he lambasted Russia for standing by Syrian President Bashar
al-Assad following a suspected gas attack that killed more than
40 people and affected hundreds of others. He was reacting to a
warning from Assad's main ally Russia on Tuesday that any U.S.
missiles fired at Syria over the deadly assault on a rebel
enclave would be shot down and the launch sites targeted.

    In morning trading, the U.S. 10-year yields were down at
2.762 percent, from 2.797 percent late on Tuesday.
    U.S. 30-year yields sank to 2.977 percent, from
Tuesday's 3.017 percent.
    On the front end of the curve, U.S. 2-year yields dipped to
2.286 percent, compared with 2.315 percent on
Tuesday.
    Later on Wednesday, Treasury will auction $21 billion in
reopened U.S. 10-year notes. Tuesday's sale of U.S. 3-year notes
drew just tepid demand, with a bid-to-cover ratio that slightly
lower from last month.
    
      April 11 Wednesday 9:13AM New York / 1313 GMT
                               Price                  
 US T BONDS JUN8               146-25/32    0-27/32   
 10YR TNotes JUN8              121-4/256    0-64/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.6975       1.7285    -0.007
 Six-month bills               1.88         1.9244    -0.011
 Two-year note                 99-232/256   2.2988    -0.016
 Three-year note               99-212/256   2.4348    -0.020
 Five-year note                99-140/256   2.5977    -0.025
 Seven-year note               99-120/256   2.7091    -0.030
 10-year note                  99-228/256   2.7625    -0.034
 30-year bond                  100-116/256  2.9769    -0.040
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        30.50         0.50    
 spread                                               
 U.S. 3-year dollar swap        24.25         0.00    
 spread                                               
 U.S. 5-year dollar swap        13.25         0.50    
 spread                                               
 U.S. 10-year dollar swap        3.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -13.75         0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Chizu Nomiyama)
  
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