TREASURIES-U.S. yields rise ahead of data, in wake of Amazon corporate supply

By Gertrude Chavez-Dreyfuss NEW YORK, Nov 29 (Reuters) - U.S. Treasury yields rose in choppy trading on Tuesday, as investors braced for a slew of data starting on Wednesday, which could reinforce expectations for a slower pace of Federal Reserve rate increases and ahead of a highly-anticipated corporate bond deal from Amazon. Investors this week are awaiting U.S. data on gross domestic product for the third quarter, Chicago manufacturing numbers, factory activity based on the Institute for Supply Management, as well as non-farm payrolls for November. "It's going to be a busy second half of the week with all the data points we're expecting. But the main focus will be on inflation and jobs," said Subadra Rajappa, head of U.S. rates strategy, at Societe Generale in New York. Fed speakers this week are also expected to stick to the script: slower rate hikes for longer. Richmond Federal Reserve Bank President Thomas Barkin on Monday said he supports moving to smaller interest-rate hikes in the central bank's fight to bring down too-high inflation. Fed funds futures have priced in a 63.5% chance of a 50 basis-point hike at a policy meeting this month, and an 88% chance of another such rate hike in February. "It's really a question of how they will change the dots at the meeting for the upcoming year," Rajappa said, referring to the Fed's interest rate projections. Investors also sold Treasuries as they anticipate details about Amazon's multi-tranche corporate bond deal. The deal features two-year, three-year, five-year, seven-year, and 10-year notes. The initial price talk on the maturities is U.S. Treasuries plus 45 basis points (bps, 55 bps, 85 bps, 100 bps, and 115 bps, respectively. Wall Street dealers typically looked to lock in borrowing costs for corporate bonds they are underwriting. As part of that process, a dealer sells Treasuries as a hedge to lock in the borrowing cost on the bond issue before the deal is completed. Once the bond is sold, the dealer buys Treasuries to exit the "rate lock." "We are the low end of the range yields. When you see corporate supply as a factor, we tend to see a little sell-off," Rajappa said. In late morning trading, the yield on 10-year Treasury notes was up 2.9 bps at 3.731%. U.S. 10-year yields rose as well after data showed that consumers' 12-month inflation expectations increased to 7.2% from 6.9% last month. The U.S. consumer confidence index, however, fell to 100.2 this month from 102.2 in October. The yield on the 30-year Treasury bond was up 2.7 b ps at 3.776 %. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes was at -74.6 bps. An inversion of this curve typically precedes recession. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 0.2 bps at 4.473%. November 29 Tuesday 10:27AM New York / 1527 GMT Price Current Net Yield % Change (bps) Three-month bills 4.28 4.3874 -0.015 Six-month bills 4.5575 4.7298 -0.005 Two-year note 100-20/256 4.4587 -0.012 Three-year note 100-190/256 4.2298 0.000 Five-year note 99-224/256 3.9028 0.011 Seven-year note 100-72/256 3.8288 0.018 10-year note 103-84/256 3.7218 0.020 20-year bond 100-32/256 3.9907 0.016 30-year bond 104-16/256 3.7724 0.023 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 31.50 0.00 spread U.S. 3-year dollar swap 12.00 -1.00 spread U.S. 5-year dollar swap 4.50 -1.00 spread U.S. 10-year dollar swap -3.75 -0.50 spread U.S. 30-year dollar swap -44.75 0.00 spread (Reporting by Gertrude Chavez-Dreyfuss Editing by Nick Zieminski)