January 9, 2018 / 8:18 PM / 2 months ago

REFILE-TREASURIES-Benchmark yields hit 10-month high on BOJ move, debt supply

 (Refiles to correct in next-to-last paragraph RIC for 10-year
    * 10-year yields hit 10-month high
    * BOJ trims bond buying, sparking sell-off
    * U.S. corporate debt issuance weighs on market
    * 3-year yields rise to highest since 2007

    By Kate Duguid
    NEW YORK, Jan 9 (Reuters) - Yields on the 10-year U.S.
Treasury note reached a 10-month high on Tuesday, after the Bank
of Japan said it will trim its purchases of Japanese government
bonds and U.S. corporate debt hit the market.
    The Japanese announcement raised speculation the country's  
central bank may wind down its monetary stimulus this year.

    Although the move was in line with the BOJ's planned
reduction in bond buying, it highlights the sensitivity of
markets to global monetary policy. 
    "We don’t necessarily see this as a signal of impending
policy change, but investors are very sensitive to the overall
monetary policy backdrop, especially out of the major central
banks," said John Briggs, head of Americas strategy at NatWest
Markets in Stamford, Connecticut. 
    Tuesday's upward pressure on yields may in part be a
response to corporate debt supply. Sempra Energy and
Athene Holding Ltd were among companies selling new debt
on Tuesday, after $9.05 billion in U.S. high-grade bonds reached
the market on Monday, according to Thomson Reuters' IFR.

    "There’s a lot of investment-grade corporate supply that is
normally expected in January, and we’re seeing some of that come
through this week," said Priya Misra, head of global rates
strategy at TD Securities in New York. "More duration hitting
the market is what’s resulting in this bear steepening move."   
    Lifetime records set by the Dow Jones Industrial Average
, the S&P 500 and the Nasdaq Composite may
also be contributing to the sell-off in Treasuries.
    Yields on 3-year notes rose to their highest since 2007
ahead of the U.S. Treasury Department's sale of $24 billion in
new supply. The auction did little to move yields, which hovered
around the record number. 
    The U.S. Treasury Department on Tuesday sold the 3-year
government notes at a yield of 2.080 percent, the highest at an
auction for this debt maturity since May 2007, Treasury data
    The United States is selling $56 billion in new supply this
week, with 10-year notes on Wednesday and 30-year bonds on
    The U.S. 10-year note yielded 2.546 percent at
2:50 p.m. EST (1950 GMT), the highest since March 15.
    The 3-year note yield, which is sensitive to
traders' views on Fed policy, was 2.074 percent at 2:53 p.m. ET
(1953 GMT), its highest since the instrument was reissued in
      January 9 Tuesday 2:31PM New York / 1931 GMT
 US T BONDS MAR8               150-11/32    -1-12/32  
 10YR TNotes MAR8              123-32/256   -0-92/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.425        1.4501    0.036
 Six-month bills               1.5675       1.602     -0.005
 Two-year note                 99-212/256   1.9642    0.004
 Three-year note               99-116/256   2.0682    0.008
 Five-year note                99-24/256    2.3189    0.032
 Seven-year note               98-180/256   2.4534    0.046
 10-year note                  97-132/256   2.5366    0.055
 30-year bond                  97-100/256   2.8808    0.066
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        19.25         0.75    
 U.S. 3-year dollar swap        18.75         1.00    
 U.S. 5-year dollar swap         4.00         0.25    
 U.S. 10-year dollar swap       -1.50         0.00    
 U.S. 30-year dollar swap      -21.00        -0.50    

 (Reporting by Kate Duguid; Editing by Jeffrey Benkoe)
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