TREASURIES-U.S. yield curve hits flattest in a decade

NEW YORK, Dec 15 (Reuters) - The margin between U.S. shorter-dated and longer-dated Treasury yields contracted to its slimmest in a decade on Friday, based on traders' expectations that the Federal Reserve would increase short-term interest rates further and long-term inflation would stay tame. A wave of yield curve-flattening trades emerged after Fed policymakers released their latest outlook on Wednesday and projected three interest rate increases in 2018. Moreover, Fed Chair Janet Yellen said at her last news conference as the head of the U.S. central bank that policymakers had upgraded their U.S. growth forecasts but stuck with their inflation view even as they considered a possible tax cut from Washington. "That sparked the extra kicker for curve flatteners the last couple of days," said Thomas Roth, head of U.S. Treasury trading at MUFG Securities America in New York. "People are very comfortable with holding long-dated paper." The yield spread between five-year and 30-year Treasuries narrowed earlier on Friday to 54.3 basis points, a level last seen in October 2007. It later ticked up to 54.4 basis points, compared with 56.6 basis points on Thursday, Reuters and Tradeweb data showed. The yield curve flattened during a mild selloff in U.S. government debt as optimism about the passage of the federal tax cuts helped push the S&P 500 stock index to a record high. At 10:44 a.m. (1544 GMT), the yield on benchmark 10-year Treasury notes was 2.373 percent, up nearly 3 basis points from late on Thursday. The two-year yield rose 3 basis points to 1.844 percent, just short of the more than nine-year peak of 1.852 percent set on Wednesday. December 15 Friday 10:45AM New York / 1545 GMT Price

US T BONDS MAR8 153-28/32 -0-7/32 10YR TNotes MAR8 124-76/256 -0-68/25


Price Current Net Yield % Change


Three-month bills 1.295 1.3171 0.002 Six-month bills 1.45 1.4808 0.008 Two-year note 99-210/256 1.844 0.033 Three-year note 99-198/256 1.9533 0.035 Five-year note 99-54/256 2.1689 0.041 Seven-year note 98-232/256 2.2961 0.034 10-year note 98-236/256 2.3726 0.027 30-year bond 100-192/256 2.7132 0.003 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 52.70 -0.70 30-year vs 5-year yield 54.30 -2.30


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 18.50 -1.25


U.S. 3-year dollar swap 16.75 -0.75


U.S. 5-year dollar swap 4.50 -0.75


U.S. 10-year dollar swap -1.75 -1.00


U.S. 30-year dollar swap -21.50 -0.75


(Reporting by Richard Leong; Editing by Lisa Von Ahn)