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TREASURIES-Yields rise on budget hopes, before supply
* Trump indicates compromise on budget
* Treasury to sell $88 billion notes this week
* Rising stocks reduce demand for bonds
By Karen Brettell
NEW YORK, April 25 (Reuters) - U.S. Treasury yields rose on
Tuesday as President Donald Trump indicated he would compromise
on a budget that, if passed, would avert a government shutdown
and as investors prepared for new Treasury supply.
Trump indicated an openness on Monday to delaying his push
to secure funds for his promised border wall with Mexico,
potentially eliminating a budget sticking point.
If the government is shut down for any significant period of
time, the Federal Reserve would not have access to data needed
to gauge the strength of the economy, reducing the likelihood of
a near-term rate increase.
Investors and dealers are also preparing for the sale of $88
billion in new short- and intermediate-dated supply this week,
starting with a $26 billion sale of two-year notes on Tuesday.
“I’d be surprised if many people are set up for this week’s
Treasury supply, given the concerns over the weekend with the
French election,” said Justin Lederer, an interest rate
strategist at Cantor Fitzgerald in New York.
Benchmark 10-year notes were last down 8/32 in
price to yield 2.30 percent, up from 2.27 percent late on
Monday. The yields hit five-month lows of 2.17 percent last
Tuesday as concerns grew about France’s vote.
Centrist Emmanuel Macron is now expected to defeat far-right
leader Marine Le Pen (Other OTC: PENC - news) in the May 7 presidential runoff.
Rising stocks and stronger risk sentiment also reduced
demand for safe-haven bonds on Tuesday.
“It’s more of a 'risk on' tone today,” said Lederer.
Investors are also more optimistic that Trump will announce
tax reforms that will help boost the economy.
Expectations that the Fed may raise interest rates at its
June meeting have increased since Trump unexpectedly said on
Friday that large tax cuts would be announced this Wednesday.
Futures traders are pricing in a 71 percent chance of June
rate hike, up from 49 percent last Wednesday, according to the
CME Group (Kuala Lumpur: 7018.KL - news) ’s FedWatch Tool.
(Editing by Lisa Von Ahn)
)
