NEW YORK, Oct 3 (Reuters) - U.S. Treasury debt yields were slightly lower on Tuesday in volatile trading as market sentiment remained cautious two days after a mass shooting in Las Vegas, with investors also continuing to weigh the prospects of another interest rate hike this year. U.S. 30-year bond yields, which move inversely to prices, were higher though, with investors absorbing a mammoth sovereign bond deal from Abu Dhabi valued at $10 billion. Abu Dhabi sold its first ever 30-year sovereign bond on Tuesday as part of a $10 billion triple-tranche debt issue that drew heavy demand. Its issue of five-, 10- and 30-year maturities had attracted more than $30 billion in demand.
Tom di Galoma, managing director at Seaport Global Holdings in New York, said the Abu Dhabi bond issue initially hurt the market. "I think accounts are selling paper out in anticipation of this deal." In mid-morning trading, the benchmark 10-year U.S. Treasury note yield was 2.328 percent, down slightly from 2.332 percent late on Monday, while the 30-year yield was up at 2.871 percent compared with Monday's 2.865 percent. U.S. two-year notes were at 1.479 percent, down from 1.487 percent on Monday. The Las Vegas shooting has remained on investors' radars, analysts said. The Sunday night shooting spree from a 32nd-floor window of the Mandalay Bay hotel, on the Las Vegas Strip, killed at least 59 people before the gunman turned a weapon on himself. More than 500 people were injured, some trampled, in the deadliest mass shooting in modern U.S. history. Seaport Holdings' di Galoma also said the bond market was starting to turn its attention to the deliberations at the White House over who might lead the Federal Reserve starting next year. Aside from Fed Chair Janet Yellen, whose current term expires in February, among those being considered are ex-Fed Governor Kevin Warsh and current Fed Governor Jerome Powell. Both Warsh and Powell were interviewed at the White House last week. "Any Fed chair announcement that comes over the next two to three weeks will be viewed as a hawkish announcement just because Yellen is such a dove," said di Galoma. "And so I think the market is starting to support the theme that whoever becomes Fed chair will be raising rates faster than Yellen would be," he added. Focus has also turned to this week's U.S. non-farm payrolls report, which could shed more light on the chances of a December rate increase.
October 3 Tuesday 10:49AM New York / 1449 GMT Price
US T BONDS DEC7 152-21/32 -0-1/32 10YR TNotes DEC7 125-84/256 0-20/256 Price Current Net Yield % Change
Three-month bills 1.045 1.0624 0.018 Six-month bills 1.1875 1.2113 -0.005 Two-year note 99-204/256 1.479 -0.008 Three-year note 99-78/256 1.6174 -0.011 Five-year note 99-196/256 1.9245 -0.010 Seven-year note 99-196/256 2.1613 -0.010 10-year note 99-68/256 2.3336 -0.003 30-year bond 97-140/256 2.8728 0.008
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 26.25 0.75
U.S. 3-year dollar swap 22.75 0.25
U.S. 5-year dollar swap 7.75 0.00
U.S. 10-year dollar swap -4.75 -0.25
U.S. 30-year dollar swap -32.75 -0.50
(Reporting by Gertrude Chavez-Dreyfuss)