March 28, 2018 / 3:33 PM / 6 months ago

TREASURIES-U.S. yields fall as Wall Street losses grow

    * Stock market losses feed safe-haven bids for Treasuries
    * U.S. to sell $29 bln 7-year notes, $15 bln 2-year FRNs 
    * Treasuries set to earn biggest monthly return since August
    * U.S. Q4 GDP revised up to 1.9 pct, beating forecasts

 (New throughout, updates yields, market activity and comments)
    By Richard Leong
    NEW YORK, March 28 (Reuters) - U.S. Treasury yields declined
on Wednesday as quarter-end buying for portfolio rebalancing and
safe-haven demand due to growing stock market losses pushed the
benchmark 10-year yield to seven-week lows.
    These factors overshadowed this week's record high $294
billion in government debt, to be completed Wednesday with sales
of $15 billion in two-year floating-rate notes and $29 billion
seven-year notes.
    The $14.6 trillion bond sector, which investors now favor
overs stocks, has produced a 0.68 percent total return in March
for its strongest month since last August, according to an index
compiled by Bloomberg and Barclays. 
    "We are seeing a strong bid this week, reflecting a
flight-to-quality demand," said Bill Merz, head of fixed income
research at U.S. Bank Wealth Management in Minneapolis. "It's
been exacerbated by short-covering."
    Traders have exited short positions or bets on bond yields
to rise this week as U.S. stock prices fell on worries about a
trade war between the United States and China and a scandal over
political consultants accessing Facebook user data.

    Speculators had heavy net short positions in Treasury
futures with near record net shorts in five-year T-notes,
according to data from the Commodity Futures Trading Commission
released last Friday.
    At 11:19 a.m. (1519 GMT), the yield on 10-year Treasury
notes was down 3.5 basis points to 2.753 percent. It
hit a seven-week low of 2.743 percent earlier.
    The yield on five-year Treasury notes reached a
six-week low of 2.540 percent earlier Wednesday. It was last
down 2.8 basis points at 2.564 percent. 
    Wall Street's three major indexes were down for a second
day, on track for their biggest monthly loss since January 2016.

    On the data front, the government revised up its reading on
domestic economic growth in the fourth quarter to 1.9 percent
from 2.5 percent. Analysts polled by Reuters had forecast an
adjustment up to 2.7 percent.
March 28 Wednesday 11:00AM New York / 1500 GMT
                               Price                   
 US T BONDS JUN8               146-6/32     0-18/32    
 10YR TNotes JUN8              121-44/256   0-68/256   
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             1.7175       1.7489     -0.026
 Six-month bills               1.8875       1.9322     -0.005
 Two-year note                 99-250/256   2.262      -0.016
 Three-year note               100          2.3748     -0.022
 Five-year note                99-188/256   2.557      -0.035
 Seven-year note               100-116/256  2.6777     -0.034
 10-year note                  100          2.7498     -0.038
 30-year bond                  99-224/256   3.0063     -0.025
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        28.50         1.00     
 spread                                                
 U.S. 3-year dollar swap        25.00         0.75     
 spread                                                
 U.S. 5-year dollar swap        13.00         0.00     
 spread                                                
 U.S. 10-year dollar swap        2.00         0.50     
 spread                                                
 U.S. 30-year dollar swap      -17.50        -0.25     
 spread                                                
 
    
 (Reporting by Richard Leong; Editing by David Gregorio)
  
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