TREASURIES-Bonds steady before two-year auction

Karen Brettell

* Treasury to sell $40 bln two-year notes Monday

* 42-day repo operation oversubscribed

* U.S.-China trade deal in focus

NEW YORK, Nov 25 (Reuters) - U.S. Treasury yields were steady on Monday before the Treasury Department is due to sell $113 billion in coupon-bearing supply this week, and as investors focused on the likelihood that the United States and China will reach a trade deal. The Treasury will sell $40 billion in two-year notes on Monday, followed by $41 billion in five-year notes on Tuesday and $32 billion in seven-year notes on Wednesday. I think the things that people are looking at the most are funding and supply, said Tom Simons, a money market economist at Jefferies in New York. Funding constraints heading into month- and year-end are in focus, after funding stresses in September prompted the Federal Reserve to step in to shore up liquidity in the market. The New York Federal Reserve on Monday accepted $25 billion of $49 billion in bids from primary dealers at a 42-day repurchase agreement (repo) operation, showing strong demand for loans that will cover the year-end period. This isnt indicative of a panic or funding pressure, but it shows there is already a cognizance of trying to buy some insurance in case funding does get wonky by the end of the year, Simons said. Optimism that a trade deal will be reached to end the damaging U.S-China trade war boosted risk appetite and reduced demand for safe-haven bonds earlier on Monday, though bonds reversed price losses after the New York open. China and the United States are very close to a phase one trade deal, the Global Times, a tabloid run by the ruling Communist Party's official People's Daily, said on Monday, discounting "negative" media reports. China said on Sunday it would seek to improve protections for intellectual property rights, which has been a key point of contention between the two countries. Fed Chair Jerome Powell will speak on Monday evening and is expected to underline the steady outlook for rates. The bond market will be closed on Thursday for the Thanksgiving Day holiday.

November 25 Monday 9:35AM New York / 1435 GMT

Price Current NetYield % Change


Three-month bills 1.555 1.5868 -0.002Six-month bills 1.56 1.5983 0.002Two-year note 99-196/256 1.6238 -0.006Three-year note 100-10/256 1.6114 -0.006Five-year note 99-106/256 1.6241 -0.005Seven-year note 99-120/256 1.7066 -0.00410-year note 99-224/256 1.7637 -0.01030-year bond 103-176/256 2.2062 -0.017


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap -1.00 1.25


U.S. 3-year dollar swap -4.00 1.25


U.S. 5-year dollar swap -6.75 0.75


U.S. 10-year dollar swap -10.00 0.50


U.S. 30-year dollar swap -36.75 0.75


(Editing by Nick Zieminski )