U.S. yields steady ahead of auctions, CPI, ECB meeting

(Recasts, updates rates, adds analyst quotes)
By Kate Duguid
NEW YORK, Sept 10 (Reuters) - U.S. government bond yields
were steady on Monday at levels reached on Friday, as investors
resisted making big trades ahead of Treasury auctions this week,
the release of August consumer price index data and a meeting of
the European Central Bank.
On Wednesday, $23 billion in 10-year notes will be on offer
and on Thursday, $15 billion of 30-year notes. New supply of
Treasuries has increased sharply in 2018 as the Federal Reserve
reduced bond buying and the Treasury issued new debt in order to
pay for U.S. President Donald Trump's $1.5 trillion tax cut.
"Once we get past the 10-year auction and 30-year auction on
Wednesday and Thursday, the market will get a better feel of
where there's real demand for 10s and 30s and to see if that
flattens the curve any," said Jim Vogel, interest rate
strategist at FTN Financial in Memphis, Tennessee.
Investors will also be watching the release of consumer
price index data, a key measure of inflation, on Thursday.
Expectations of higher inflation rose on Friday after the
Labor Department reported the largest annual rise in wages since
June 2009.
The department reported that average hourly earnings
increased 0.4 percent, or 10 cents in August. That raised the
annual increase in wages to 2.9 percent in August. The data
solidified prospects of a September interest-rate hike.
The two-year yield, which reflects market expectations of
Fed interest-rate hikes, was up about half a basis point on
Monday to a top of 2.715 percent, its highest since July 2008.
Interest rate futures traders have fully priced in a third
rate increase at the September meeting, according to the CME
Group's FedWatch Tool. The odds of an additional hike in
December, which would be the fourth this year, were at 72
percent on Monday, up from 69 percent the day before the jobs
data release.
Investors will also be watching the European Central Bank
meeting on Thursday, as the bank moves away from unprecedented
quantitative easing and towards quantitative tightening.
Yields on Monday were roughly unchanged from Friday, with
the 10-year yield down slightly at 2.933 percent
from Friday's high of 2.950 percent, its highest since Aug. 9.
The 30-year yield was down at 3.085 percent, after
also hitting its highest on Friday since Aug. 9 at 3.110
percent.

September 10 Monday 2:57PM New York / 1857 GMT
Price
US T BONDS DEC8 142-24/32 0-6/32
10YR TNotes DEC8 119-168/256 0-4/256
Price Current Net
Yield % Change
(bps)
Three-month bills 2.0925 2.1322 -0.005
Six-month bills 2.255 2.312 0.005
Two-year note 99-212/256 2.715 0.008
Three-year note 99-234/256 2.7803 0.005
Five-year note 99-166/256 2.8262 0.003
Seven-year note 99-32/256 2.8894 -0.004
10-year note 99-124/256 2.9351 -0.007
30-year bond 98-80/256 3.0867 -0.016

DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 18.50 -0.25
spread
U.S. 3-year dollar swap 16.25 -0.50
spread
U.S. 5-year dollar swap 13.00 0.00
spread
U.S. 10-year dollar swap 6.00 -0.25
spread
U.S. 30-year dollar swap -7.25 0.00
spread



(Reporting by Kate Duguid
Editing by Susan Thomas)


First Published: 2018-09-10 16:47:09
Updated 2018-09-10 21:14:19


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