TREASURIES-Investors slow selling, eye talks in Washington

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 (Updates market activity; adds analyst comment)
    By Ross Kerber
    Sept 29 (Businesshala) - Traders slowed their selling of U.S.
Treasuries on Wednesday, leaving yields little changed, as they
kept an eye on government budget talks in Washington.
    The benchmark 10-year yield was up 1 basis point
at 1.5462% while yields on shorter-term debt were lower. After
four consecutive sessions in which the 10-year yield rose, the
yield fell as low as 1.494% on Wednesday morning before finding
support.
    Analysts said investors were taking stock after Treasury
market moves of recent days and trying to forecast how
negotiations on U.S. spending plans might resolve.
    "The momentum is all on the bear side of this," said Kim
Rupert, senior economist for Action Economics.
    Major Wall Street indexes were higher, boosted by technology
stocks and aircraft maker Boeing Co.
    Congress on Wednesday was facing a two-day deadline until
the federal government begins shutting many of its operations
unless Democrats in Congress reach a deal to provide funding for
the fiscal year that begins Friday.
    For now, investors expect some kind of deal that avoids big
disruptions to the Treasury market, said Rupert of Action
Economics and Padhraic Garvey, head of research for ING
Americas. But a continued impasse would eventually pressure the
market, for example if ratings agencies downgraded the United
States.
    In addition, investors are focused on when the Federal
Reserve may begin to unwind its support for the economy, though
the Fed has indicated it still needs to see further progress
toward its employment and inflation goals.
    "There's headwinds out there, and it does make sense for us
to have a bit of a pause here," Garvey said.
    On Tuesday, U.S. Treasury Secretary Janet Yellen again
warned the government was close to exhausting its borrowing
capabilities - now set for Oct. 18. The deadline
has worried the market for Treasury bills with yields on
short-term debt now higher than some longer-term issues. tmsnrt.rs/39QboZz
    The yield on the one-month bill spiked as high as
0.086% on Tuesday, the highest since the first quarter of 2021.
It fell back on Wednesday and was last at 0.0507% after U.S.
House of Representatives Speaker Nancy Pelosi said Congress will
move to pass legislation that would suspend the debt limit.

     The trading left little changed a closely watched part of
the U.S. Treasury yield curve measuring the gap between yields
on two- and 10-year Treasury notes, seen as an
indicator of economic expectations. It was at 124 basis points,
about the same as Tuesday's close.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down about a
basis point at 0.299%.  
    The 10-year TIPS yield was at -0.833% and the
breakeven inflation rate was at 2.396%.
     
      September 29 Wednesday 2:43PM New York / 1843 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.04         0.0406    0.000
 Six-month bills               0.05         0.0507    -0.005
 Two-year note                 99-231/256   0.299     -0.008
 Three-year note               99-134/256   0.5376    -0.018
 Five-year note                99-84/256    1.0132    -0.011
 Seven-year note               99-94/256    1.345     -0.001
 10-year note                  97-76/256    1.5462    0.010
 20-year bond                  95-56/256    2.0439    0.024
 30-year bond                  97-224/256   2.096     0.026
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.25        -0.25    
 spread                                               
 U.S. 3-year dollar swap        12.50        -0.25    
 spread                                               
 U.S. 5-year dollar swap         7.50        -0.50    
 spread                                               
 U.S. 10-year dollar swap      !Empty       !Empty    
 spread                        value        value     
 U.S. 30-year dollar swap      -25.25        -0.50    
 spread (Reporting by Ross Kerber in Boston; Editing by Nick Macfie and
Leslie Adler)
  
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