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TREASURIES-Long-dated yields gain before Fed decision, other events

NEW YORK, Jan 30 (Reuters) - U.S. Treasury long-dated yields rose on Tuesday in choppy trading ahead of a slew of events this week such as a Federal Reserve monetary policy decision which could help shed more light on the outlook for interest rates this year. U.S. benchmark 10-year yields, which move inversely to prices, touched their strongest level in nearly four years, while 30-year yields climbed to their highest since May 2017. Gennadiy Goldberg, interest rates strategist, at TD Securities in New York said, investors were initially spooked by declines on Wall Street overnight and on Tuesday, earlier prompting a flight to the safety of U.S. government bonds. But he said the Treasuries price rally has since tapered off as investors positioned for several crucial events led by President Donald Trump's first State of the Union address to Congress later on Tuesday, the Fed statement on Wednesday, and the impending U.S. non-farm payrolls report for January. Trump is expected to take credit for U.S. economic gains in the past year as well as tout the benefits of a tax overhaul approved by the Republican-controlled Congress in December. He could also announce some infrastructure spending ahead.

The Fed will be a big focus this week, with some analysts expecting a hawkish tone from the U.S. central bank. "The Fed could still price a great deal more into the front-end and the belly if it chose to do so," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York, referring to the short- and medium-term debt. "We are currently pricing roughly 65 basis points (of rate hikes) into 2018," he added. In mid-morning trading, benchmark U.S. 10-year note yields edged up to 2.712 percent, from Monday's 2.699 percent. Overnight, 10-year yields hit 2.733 percent, the highest since April 2014. U.S. 30-year bond yields also rose to 2.973 percent , up from 2.943 percent late on Monday. The yield on this maturity touched an 8-1/2-month peak of 2.989 percent earlier in the session. U.S. 2-year yields, meanwhile, were slightly down at 2.116 percent, from Monday's 2.124 percent. The yield curve has steepened, with the spread between five-year and 30-year yields widening to 47.80 basis points . The gap between U.S. 2-year and 10-year yields rose to 58.10 basis points, the widest in three weeks. TD's Goldberg said Tuesday's steepening was just a reversal of a generally flattening trend in the last couple of weeks, with investors taking profits on those trades.

January 30 Tuesday 10:46AM New York / 1546 GMT Price

US T BONDS MAR8 147-21/32 -0-15/32 10YR TNotes MAR8 121-196/256 -0-12/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 1.425 1.4501 -0.003 Six-month bills 1.6275 1.6638 -0.005 Two-year note 99-196/256 2.1203 -0.004 Three-year note 99-72/256 2.2525 -0.005 Five-year note 99-114/256 2.4937 -0.003 Seven-year note 99-36/256 2.6352 0.002 10-year note 96-16/256 2.7105 0.012 30-year bond 95-172/256 2.9698 0.027

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 19.25 0.50

spread

U.S. 3-year dollar swap 18.75 0.75

spread

U.S. 5-year dollar swap 7.25 0.50

spread

U.S. 10-year dollar swap 2.25 0.00

spread

U.S. 30-year dollar swap -14.50 -0.25

spread

(Editing by Bernadette Baum)