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TREASURIES-U.S. yields start higher in 2018 in step with Europe

* ECB's Coeure sees chance bond buys will not be extend

* Wall Street gains add upward pressure on bond yields

* U.S. to sell $160 bln in T-bills later Tuesday

* U.S. Treasuries gained 2.3 pct in 2017 vs 19.5 pct for S&P 500

NEW YORK, Jan 2 (Reuters) - U.S. Treasury yields rose on Tuesday in line with European government yields after comments from a European Central Bank official who said the central bank's massive bond purchase program might not continue later this year. Benoit Coeure, the ECB board member who oversees its market operations, told Caixin Global, a Chinese financial magazine that he sees "a reasonable chance" the 2.55 trillion euros stimulus program will not be extended again when it expires in September. "European bonds are weaker because of comments from Coeure," said Karl Haeling, vice president at Landesbank Baden-Wurttemberg in New York. "You have a stronger stock market." Investors piled back into stocks from bonds at the start of 2018 after Wall Street scored its strongest performance in four years in 2017, buttressed by steady economic growth, solid corporate earnings and the most dramatic overhaul of the federal tax code in 30 years. U.S. government bonds produced a 2.3 percent annual return last year, as low inflation offset three rate increases from the Federal Reserve, according to an index compiled by Bloomberg and Barclays. This compared with a 19.5 percent yearly gain for the S&P 500. At 10:50 a.m. (1550 GMT), the benchmark 10-year Treasury yield was up 4 basis points at 2.452 percent following a 2 basis-point dip last year. Its German counterpart rose nearly 3 basis point to 0.454 percent after touching a two-month peak earlier Tuesday.

In the bond market selloff, the margin between shorter and longer-dated Treasury yields grew after last week's flattening. The five-to-30-year part of the yield curve steepened to almost 55 basis points from 51 basis points earlier on Tuesday which was its flattest level in a decade. On the supply front, the Treasury Department will sell $160 billion worth of bills on Tuesday: $50 billion in one-month bills, $48 billion in three-month bills , $42 billion in six-month bills and $20 billion in one-year bills. U.S. financial markets reopened on Tuesday after the New Year's Day holiday on Monday. January 2 Tuesday 10:52AM New York / 1552 GMT Price

US T BONDS MAR8 152-3/32 -29/32 10YR TNotes MAR8 123-184/256 -11/32 Price Current Net Yield % Change

(bps)

Three-month bills 1.4075 1.4318 0.041 Six-month bills 1.53 1.5629 0.028 Two-year note 99-234/256 1.9191 0.028 Three-year note 99-156/256 2.012 0.036 Five-year note 99-108/256 2.2481 0.037 Seven-year note 99-52/256 2.3744 0.041 10-year note 98-56/256 2.4542 0.043 30-year bond 99-32/256 2.7933 0.052 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 53.30 1.50 30-year vs 5-year yield 54.50 1.40

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 18.25 -0.25

spread

U.S. 3-year dollar swap 18.00 -0.75

spread

U.S. 5-year dollar swap 3.25 -0.25

spread

U.S. 10-year dollar swap -2.00 -0.50

spread

U.S. 30-year dollar swap -21.25 -0.75

spread

(Reporting by Richard Leong; Editing by Susan Thomas)