March 29, 2018 / 6:20 PM / 3 months ago

TREASURIES-U.S. bond market posts strong end to weak first quarter

    * U.S. yield curve hits flattest in more than a decade
    * Treasuries record gains in March after two months of
losses
    * Chicago PMI lowest in a year, consumer sector seen steady
    * U.S. bond market closes early, to shut on Friday

 (Updates market action after early close)
    By Richard Leong
    NEW YORK, March 29 (Reuters) - U.S. Treasury yields fell on
Thursday, posting a strong finish to a weak first quarter, as
investors piled into low-risk government bonds on worries about
economic growth and the recent dramatic pullback in stock
prices.
    The U.S. bond market closed early at 2 p.m. EDT (1800 GMT)
and will shut for the Good Friday holiday. 
    The $14.6 trillion bond sector has generated a 0.72 percent
total return in March for its best month since August,
rebounding from losses in January and February. Still, they have
produced a 0.11 percent loss in the first three months of 2018,
according to an index compiled by Bloomberg and Barclays.

    "We are seeing some rotation out of equities into fixed
income," said Larry Milstein, head of government and agency
trading at R.W. Pressprich & Co. in New York. "Some of this has
to do with the pullback in stocks and some of it has to do with
what's coming out of Washington."
    Wall Street has sagged on fears about a global trade war
after U.S. President Donald Trump introduced tariffs against
China and other nations for perceived unfair trade practices.
Stock prices also tumbled on jitters about technology shares in
the wake of a scandal over political consultants accessing
Facebook data on 50 million users.
    The S&P 500 and Dow are on track for their worst quarter in
more than two years.
    Safe-haven bids for bonds supported demand for $294 billion
worth of Treasury bills and notes this week, a record amount,
traders and analysts said.
    "We made it through some significant supply here," Milstein
said.
    The yield on 10-year Treasury notes was down 3.4
basis points at 2.741 percent. It hit a seven-week low of 2.739
percent earlier Thursday.
    During March, the 10-year yield fell about 13 basis points,
its steepest decline since August. However, it has risen 35
basis points for the quarter.
    The drop in longer-dated yields on Thursday flattened the
yield curve to levels not seen in more than a decade.
    The spread between two-year and 10-year Treasury yields
 contracted to 46.50 basis points, the tightest
since September 2007, Tradeweb data showed.
    A flattening curve is a proxy on investors' concerns over
slowing economic growth.
    The Chicago purchasing management index unexpectedly fell to
a one-year trough in March
    On the other hand, the jobs market has remained solid with
first-time filings for unemployment benefits hitting a more than
45-year low last week. Consumer spending rose a second straight
month, while the University of Michigan said consumer confidence
ended March at its strongest in more than 14 years.

  Thursday, March 29 at 1405 EDT (1805 GMT):
                               Price                   
 US T BONDS JUN8               146-19/32    0-23/32    
 10YR TNotes JUN8              121-40/256   0-64/256   
                               Price        Current    Net
                                            Yield      Change
                                            (pct)      (bps)
 Three-month bills             1.6825       1.7128     -0.023
 Six-month bills               1.8775       1.9214     -0.016
 Two-year note                 99-246/256   2.2701     -0.016
 Three-year note               99-248/256   2.3858     -0.022
 Five-year note                99-182/256   2.562      -0.029
 Seven-year note               99-156/256   2.6866     -0.036
 10-year note                  100-20/256   2.7407     -0.034
 30-year bond                  100-140/256  2.9721     -0.042
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        30.75         2.75     
 spread                                                
 U.S. 3-year dollar swap        26.50         2.50     
 spread                                                
 U.S. 5-year dollar swap        14.25         2.00     
 spread                                                
 U.S. 10-year dollar swap        3.50         1.25     
 spread                                                
 U.S. 30-year dollar swap      -15.25         1.25     
 spread                                                
 
    
 (Reporting by Richard Leong
Editing by Chizu Nomiyama and James Dalgleish)
  
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