January 29, 2019 / 3:49 PM / 6 months ago

TREASURIES-Anticipated new issue demand, consumer confidence data drag yields lower

NEW YORK, Jan 29 (Reuters) - U.S. Treasury yields fell across maturities on Tuesday as investors anticipated strong demand for $78 billion of new issues on sale later in the day and data showing U.S. consumer confidence at its lowest since July 2017.

Good results from the $162 billion in new debt offered Monday pushed up expectations for that afternoon's $32 billion sale of seven-year notes. Yields fell, with the biggest loss on the seven-year, which was down two basis points at 2.63 percent.

The flood of supply coincides with signs that Federal Reserve Chairman Jerome Powell may pause the central bank's gradual interest rate increases after U.S. economic data came in softer than expected in December and investors were whipped around by financial markets. Strong demand for U.S. debt indicates the market believes that rates will not be raised, at least in the short term.

In considering the strong performance on Monday compared to weaker debt auctions the previous month, "we suspect the commencement of the Fed's pause to begin the New Year is the primary fundamental impetus," wrote Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

"The prospect of an extended hiking respite and worries on dimming growth seem to have underpinned solid primary market appetite."

A group of bidders, which included bond dealers and large fund managers, purchased their largest share of five-year notes since July 2014 on Monday, U.S. Treasury Department data showed.

Also on Monday, indirect bidders, including fund managers and most foreign central banks, purchased their biggest share of two-year note supply in a year.

Yields were also dragged lower following data showing that an index of U.S. consumer confidence was at its lowest since July 2017.

The Federal Reserve begins its monthly two-day policy meeting on Tuesday, with no change expected to rates. Chair Jerome Powell will give a news conference after every monthly meeting this year beginning Wednesday.

Later this week, investors will be watching the release of several important economic data reports, some of which had been delayed by the record five-week partial U.S. government shutdown that ended this weekend.

Employment data for December will be published on Friday and is expected to show the shutdown's impact.

The benchmark 10-year yield was down 1.6 basis points, last at 2.73 percent. The two-year yield, which reflects market expectations of rate hikes was down 1.4 basis points, last at 2.58 percent.

Reporting by Kate Duguid; Editing by Bernadette Baum

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below