TREASURIES-Yields rise a day after tumbling, as bond rally halts

(Recasts, updates yields, adds analyst comments) April 16 (Reuters) - U.S. Treasury yields rebounded a bit on Friday from the previous session's tumble to multi-week lows, as Japanese buying and short covering that appeared to be primary factors in the abrupt rally abated. The benchmark 10-year Treasury yield was 5.5 basis points higher at 1.5851%. It fell more than 10 basis points on Thursday, the biggest one-day move down since November, amid heavy buying that was attributed to several factors, with traders casting about for a single trigger. The yield, which moves in the opposite direction from prices, touched a low of 1.5280% - well off a 14-month high of 1.776% reached on March 30. The market was taking "a breather" following the rally, according to Andrew Richman, senior fixed income strategist at Sterling Capital Management. "It's not a big move today," he said. "It's just a little bit of a give up given how much rates have come down from their peak of 1.75% (on the 10-year note)." Justin Lederer, Treasury analyst at Cantor Fitzgerald in New York, said Japanese buying and "a lot of short covering" were factors in Thursday's rally. A BofA Global Research report on Friday said yields falling below the "important technical level" of 1.58%-1.6% likely triggered short covering. It also said hedging activity related to recent bank debt sales may have also boosted Treasury buying. The dive in yields came despite robust U.S. retail sales data and a bigger-than-expected drop in initial jobless claims and amid mounting Russia-U.S. tensions. "It's impossible to explain the move yesterday, perhaps it has something to do with a safety bid following U.S./Russia tensions," said Chris Scicluna, head of economic research at Daiwa Capital Markets in London. "But the fact is that higher yields would have bought in buyers, especially from Asia." Analysts have said they expected Japan to recommence Treasury purchases in its new fiscal year, which began April 1. Foreign selling of Treasuries in February was at its highest since April 2020 with Japan leading the slide in foreign holdings as the end of its fiscal year approached, according to U.S. Treasury data released on Thursday. The fast deterioration of Japan's economic outlook undoubtedly played a role in pushing U.S. yields lower, according to Christian Gerlach, a founding partner at boutique investment firm Gerlach Associates. "At the same time, the U.S. yield curve is still much steeper than the Japanese one," he said. "Japan's bond carry is suffering, and U.S. carry looks like a good refuge for the time being." The two-year Treasury yield, which typically moves in step with interest rate expectations, was last less than a basis point higher at 0.1652%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last less than a basis point steeper from Thursday's close at 141.82 basis points. The overnight repurchase or repo rate slipped to 0.02% on Friday, from 0.3% the previous session due to the inflow of cash from government state enterprises, analysts said. Next week will bring auctions for $24 billion of 20-year bonds on Wednesday and $18 billion of five-year Treasury Inflation-Protected Securities on Thursday. The market breathed a sigh of relief this week after the successful auctions of $120 billion of bonds and notes. April 16 Friday 3:51PM New York / 1951 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0175 0.0177 0.003 Six-month bills 0.0425 0.0431 0.002 Two-year note 99-236/256 0.1652 0.008 Three-year note 100-22/256 0.3461 0.021 Five-year note 99-154/256 0.8323 0.040 Seven-year note 99-232/256 1.2641 0.047 10-year note 95-212/256 1.5851 0.055 20-year bond 95-112/256 2.159 0.052 30-year bond 91-100/256 2.274 0.065 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.25 0.00 spread U.S. 3-year dollar swap 12.25 0.25 spread U.S. 5-year dollar swap 8.00 -0.50 spread U.S. 10-year dollar swap -1.75 0.00 spread U.S. 30-year dollar swap -28.00 -0.25 spread (Reporting by Dhara Ranasinghe in London and Karen Pierog in Chicago; additional reporting by Thyagaraju Adinarayan and Gertrude Chavez-Dreyfuss; editing by Sujata Rao, Marguerita Choy and Chizu Nomiyama)