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TREASURIES-Prices dip ahead of U.S. debt supply, Saudi Aramco in focus

Gertrude Chavez-Dreyfuss

* Demand for Saudi Aramco debut bond 'more than $30 bln'

* Factory orders fall less than expected in February

* U.S. inflation data, Fed minutes on tap this week

* Markets price in one rate cut this year-BMO

(Adds comment, details on what's expected this week, updates prices) NEW YORK, April 8 (Reuters) - U.S. Treasury debt prices drifted lower in generally quiet trading on Monday, pressured by upcoming government debt and corporate supply. Investors this week are bracing for oil company Saudi Aramco's inaugural bond deal as well as the U.S. Treasury's $78 billion auction of notes and bonds. The Saudi deal is expected to be priced on Tuesday. "Supply is definitely a factor this week with the Saudi Aramco deal along with the Treasury auctions," said Justin Lederer, Treasury analyst, at Cantor Fitzgerald in New York. "With the Saudi deal set to be priced tomorrow, the longer bonds are getting a little bit of pressure." Wall Street dealers typically lock in borrowing costs for corporate bonds they are underwriting by selling Treasuries as a hedge before the deal is completed. Once the bond is sold, the dealer buys back Treasuries to exit the rate lock. Demand for Saudi Aramco's international bond, seen as a gauge of potential investor interest in the oil company's eventual initial public offering, is higher than $30 billion, Saudi Energy Minister Khalid al-Falih said on Monday.

That represents an oversubscription of more than three times the size of the bond if Aramco sticks to its plan to issue around $10 billion in the debt sale this week. In the United States, the U.S. Treasury will auction $38-billion in three-year notes, $24 billion in 10-year notes, and $16 billion in 30-year bonds. Investors typically sell Treasuries ahead of an auction to push the yield higher so they can buy them at a lower price. The market is also waiting for data on U.S. consumer and producer prices this week amid cooling wage pressures. The minutes from the last Federal Reserve policy meeting will be also be on tap this week. BMO Capital Markets said in a research note the minutes "offer a glimpse at just how dire the Fed views on the current economic environment, from which investors will endeavor to skew the probability of a pre-emptive rate cut later this year." The bank noted that the fed fund futures markets has fully priced in a 25 basis-point rate cut by the end of the year. In late trading, U.S. 10-year note yields rose to 2.518% , up from 2.499% late on Friday. U.S. 30-year bond yields, were also up at 2.925% , from 2.909% on Friday. On the short end of the curve, U.S. 2-year yields were up at 2.359%, compared with Friday's 2.343%. Yields inched higher after data showed new orders for U.S.-made goods fell less than expected in February. Factory goods orders dropped 0.5 percent in February.

April 8 Monday 3:28PM New York/1928 GMT

Price Current NetYield % Change

(bps)

Three-month bills 2.375 2.4219 -0.012Six-month bills 2.395 2.4639 0.005Two-year note 99-202/256 2.3597 0.017Three-year note 100-44/256 2.3137 0.017Five-year note 99-14/256 2.3272 0.015Seven-year note 98-232/256 2.4213 0.02210-year note 100-228/256 2.5222 0.02330-year bond 101-112/256 2.9273 0.018

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 9.50 -0.75

spread

U.S. 3-year dollar swap 7.00 -0.25

spread

U.S. 5-year dollar swap 3.75 0.00

spread

U.S. 10-year dollar swap -1.75 0.00

spread

U.S. 30-year dollar swap -24.75 0.00

spread

(Reporting by Gertrude Chavez-Dreyfuss Editing by Susan Thomas)