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TREASURIES-Yields tumble to one-month lows despite upbeat data

 (Recasts, updates yields, adds analyst comments, upcoming
auctions and repo rate)
    By Karen Pierog
    CHICAGO, April 15 (Reuters) - U.S. Treasury yields dived to
one-month lows on Thursday as a possible safe-haven bid related
to increased U.S.-Russia tensions, along with Japanese buying
and technical factors, helped overshadow better-than-expected
economic data. 
    The benchmark 10-year yield, fell to a one-month
low of 1.528% and posted its biggest one-day drop on a
percentage basis since Nov. 12, despite strong retail sales and
jobless claims data that pointed to an economy revved up by the
COVID-19 vaccine rollout and fiscal stimulus. 
    The 10-year rate was last down 8.5 basis points at 1.5513%.
Yields in the belly and long end of the curve also fell to their
lowest levels in about a month.
    Some analysts pointed to growing international risks as a
contributor to the rally after the U.S. government on Thursday
imposed a broad array of sanctions on Russia as punishment for
alleged misdeeds, including interfering in the 2020 U.S.
election and as tensions between Russia and Ukraine increased.

    "Treasury yields are falling due (to) geo-political     
risks coming from the escalation of Russia/Ukraine conflict,    
Japanese rumored long-end buying, lack of volume being traded,  
and yields falling once again in European core markets," Tom di
Galoma, managing director at Seaport Global Holdings, said in an
email. 
    However, he questioned if the drop was sustainable "now that
(10-year) yields broke through 1.6% support level as this move
has happened on a day where economic data was stronger than
expected." 
     Ben Jeffery, a strategist at BMO Capital Markets in New
York, said he was a bit skeptical about a safe-haven bid given
Wall Street's move higher on Thursday. Instead, some investors
backing out of their short positions in Treasuries could be a
factor in the yield drop, he added. 
    "There were probably a lot of participants who got short in
the run-up to 1.75% 10-year yields, anticipating the next leg of
the move would be up toward that 2% level, but the fact that
we've seen some buying interest emerge since then has probably
added to this rally we're seeing today," he said.
    Jeffery also said the Treasury market may have been
expecting Thursday's economic data to be even better than it
was.
     Retail sales increased 9.8% last month, the biggest gain in
10 months, the Commerce Department said on Thursday. Data for
February was revised higher to show sales dropping 2.7% instead
of 3.0% as previously reported. Economists polled by Reuters had
forecast retail sales increasing 5.9% in March.
    Initial claims for state unemployment benefits totaled a
seasonally adjusted 576,000 for the week ended April 10,
compared with 769,000 in the prior week. Economists polled by
Reuters had forecast 700,000 applications in the latest week.
    The Treasury Department announced it will auction $24
billion of 20-year bonds and $18 billion of
five-year Treasury Inflation-Protected Securities
next week. The market breathed a sigh of relief this week after
the successful auctions of $120 billion of bonds and notes. 
    The two-year Treasury yield, which typically
moves in step with interest rate expectations, was last less
than a basis point lower at 0.159%. 
    A closely watched part of the yield curve that measures the
gap between yields on two- and 10-year Treasury notes 
 was last 7.70 basis points flatter at 139.23 basis
points.
    In the overnight repo market, the rate rose to 0.03%
 in afternoon trading, from 0% late on Wednesday. The
rate has gone negative a few times in February and March due to
excess cash in the financial system.
    Analysts said the $271 billion of gross Treasury bill and
coupon settlements combined with a regular corporate tax date
increased demand for short-term cash in the repo market on
Thursday and pushed rates higher.
      April 15 Thursday 4:00PM New York / 2000 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.015        0.0152    -0.005
 Six-month bills               0.04         0.0406    0.000
 Two-year note                 99-239/256   0.159     -0.004
 Three-year note               100-32/256   0.3331    -0.026
 Five-year note                99-190/256   0.8031    -0.057
 Seven-year note               100-28/256   1.2335    -0.076
 10-year note                  96-32/256    1.5513    -0.085
 20-year bond                  95-200/256   2.137     -0.086
 30-year bond                  92-68/256    2.2314    -0.093
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        11.50         0.00    
 spread                                               
 U.S. 3-year dollar swap        12.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         8.50         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.50        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -27.50         0.25    
 spread (By Karen Pierog; addition reporting by Gertrude
Chavez-Dreyfuss and Kate Duguid in New York; Editing by
Alexandra Hudson and Dan Grebler)
  
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