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TREASURIES-Yields hover near multi-year highs ahead of auctions

* Three-year yields hover near 10-year highs

* 10-year yields near four-year highs

* Treasury to auction $28 bln in three-year notes

NEW YORK, March 12 (Reuters) - Yields on the three-year and 10-year U.S. Treasury notes hovered near multiyear highs ahead of auctions of both maturities later on Monday, which may be pressured up further if demand for the increased supply is weak. Strong payrolls data reported on Friday and a continued rally in U.S. equities supported Treasury yields in early trade. A high yield going into auction could limit demand from bidders at that level, widening the spread between the expected high yield when the auction starts, versus the actual high yield during the auction. A wider spread is called a "tail" and indicates weaker demand from bidders. "Auctions last month tailed," said Tom Simons, money market economist at Jefferies & Co in New York, referring to February's near-record issue of supply. "If yields get a little too rich, youll see a repeat of that scenario." The yield on the three-year note was last at 2.436 percent, slightly off the 10-year high of 2.455 percent hit on Friday. The benchmark 10-year government note was last at 2.890 percent, just below the 2.957 percent hit on Feb. 21, its highest since trading above 3 percent in January 2014. The Treasury Department will auction off $28 billion in three-year notes and $21 billion in 10-year notes on Monday. The three-year supply has increased by $2 billion from the last auction, and the 10-year reopening is $1 billion larger than the last auction. The supply of U.S. debt at auction has increased as the Federal Reserve has begun to withdraw liquidity and reduce its bond buying. The government has also been forced to boost issuance to help fund President Donald Trump's tax overhaul and two-year budget deal. The federal debt load is expected to swell by as much as $1.5 trillion because of the tax overhaul signed into law in December, while the budget agreement would boost government spending by almost $300 billion over the next two years. The increased issuance is also expected to put downward pressure on prices, driving yields up. Weaker demand in February was in part attributed to the growing supply. Still, "We're not at a point yet where auction sizes are so big that it causes real digestion issues," said Simons. "We're still talking about the difference between a really good auction and an average one." Also in focus this week will be the publication of Consumer Price Index data on Tuesday, a key measure of inflation. February's number beat estimates, increasing expectations the Fed may raise interest rates a fourth time in 2018.

March 12 Monday 10:39AM New York / 1439 GMT Price

US T BONDS JUN8 143-14/32 0-10/32 10YR TNotes JUN8 120-8/256 0 Price Current Net Yield % Change

(bps)

Three-month bills 1.65 1.6795 0.005 Six-month bills 1.84 1.8826 0.003 Two-year note 99-248/256 2.2661 0.000 Three-year note 99-122/256 2.436 0.000 Five-year note 99-222/256 2.6536 0.000 Seven-year note 99-156/256 2.812 0.000 10-year note 98-200/256 2.892 -0.002 30-year bond 97-48/256 3.1457 -0.013

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 31.50 1.00

spread

U.S. 3-year dollar swap 25.75 0.00

spread

U.S. 5-year dollar swap 14.00 0.50

spread

U.S. 10-year dollar swap 2.50 0.00

spread

U.S. 30-year dollar swap -15.75 0.75

spread

(Reporting by Kate Duguid; Editing by Jonathan Oatis)