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TREASURIES-U.S. yields fall on gradual Fed rate-hike view
* Latest U.S (Other OTC: UBGXF - news) . data support view on modest U.S. economic
growth
* Futures imply low probability Fed raising rates in
September
* U.S. $14 bln in 5-year TIPS supply seen fetching negative
yield
(Updates market action, adds quote)
By Richard Leong
NEW YORK, Aug 18 (Reuters) - U.S. Treasury yields slipped on
Thursday on bets the Federal Reserve is in no hurry to raise
interest rates with domestic inflation stuck below its 2 percent
goal and uncertainty about global risks to economic growth at
home.
The decline in yields followed Wednesday's release of
minutes of the central bank's July 26-27 policy meeting in which
policy-makers said they wanted to "leave their policy options
open."
Thursday's data on new unemployment claims and Mid-Atlantic (Shanghai: 600558.SS - news)
business activity from the Philadelphia Fed supported the notion
of a continued economic expansion but not one that is strong
enough to handle a steady string of rate increases, analysts and
investors said.
"It's a long way from what the Fed had signaled back in
December. It's about a rate hike, not a rate-hike campaign,"
said Matt Toms, head of public fixed income at Voya Investment
Management in Atlanta (BSE: 532759.BO - news) .
Interest rate futures implied traders see a 10 percent
chance the Fed will raise rates at its Sept. 20-21 policy
meeting, down from about 14 percent at Wednesday's close,
according to Reuters data.
The yield on two-year Treasury notes, which is
sensitive to traders' views on Fed policy, was down nearly 2
basis points at 0.722 percent. On Wednesday, it reached a
three-week peak of 0.774 percent shortly before the release of
the FOMC minutes.
Benchmark 10-year Treasury notes were up 4/32 in
price to yield 1.551 percent, down 1 basis point from Wednesday,
while the 30-year bond was up 5/32 in price for a
yield of 2.265 percent, down 0.8 basis point.
On the supply front, the U.S. Treasury Department will sell
$14 billion of five-year Treasury Inflation Protected Securities
at 1 p.m. ET (1700 GMT).
In "when-issued" activity, traders expected the latest
five-year TIPS supply to sell at a yield of -0.204 percent,
compared with the -0.195 percent yield on the $16 billion
offered in April, according to Tradeweb.
August 18 Thursday 11:47AM New York / 1547 GMT
Price
US T BONDS SEP6 171-21/32 0-2/32
10YR TNotes SEP6 132-60/256 0-32/256
Price Current Net
Yield % Change
(bps)
Three-month bills 0.295 0.2993 -0.003
Six-month bills 0.4325 0.4395 -0.021
Two-year note 100-14/256 0.7216 -0.016
Three-year note 99-186/256 0.8428 -0.021
Five-year note 99-252/256 1.1282 -0.020
Seven-year note 99-12/256 1.3944 -0.015
10-year note 99-140/256 1.5491 -0.012
30-year bond 99-160/256 2.2673 -0.006
DOLLAR SWAP SPREADS
Last (bps) Net (LSE: 0LN0.L - news)
Change
(bps)
U.S. 2-year dollar swap 25.00 0.50
spread
U.S. 3-year dollar swap 18.50 0.50
spread
U.S. 5-year dollar swap 1.75 0.00
spread
U.S. 10-year dollar swap -13.00 0.00
spread
U.S. 30-year dollar swap -52.25 -0.50
spread
(Reporting by Richard Leong; Editing by Steve Orlofsky)
