Treasuries end Tues weaker after....>

US TSYS SUMMARY: Treasuries end Tues weaker after a mixed/OK $26B 2Y auction

occurred shortly after Fed Chr Yellen spoke. She said inflation uncertainties

call for gradual rate moves but hiking too slowly risks overheated labor mkt;

also she said mkt shd expect inflation overshoot with symmetric tgt (2% not

ceiling.) 

- Two-yr auction drew 1.463% rate, moderate/low 44.15% indirects, but very

strong 19.04% directs (most since Feb. 2017). 

- Tsys opened mildly lower, light volume, long end on/off bid ahead open. Minn

Fed Kashkari said late Mon hiking rates as inflation remains weak a mistake. 

- Little react to data, Redbk Sep store sales unchanged, Case-Shiller home price

index +0.3 M/M. MBS tightened earlier. TIPS underperformed nominal Tsys. 

- Strong US$ vs Yen spurred FX-acct selling in Tsys, corporate/auction

concession, duration selling in morning. Mild 2way flow with better selling

midmorning. US swaps end mostly tighter, light swap-tied payg short end, spd

flatteners, steepeners out curve. Tsys 3pm ET: 2Y 1.440%, 3Y 1.570%, 5Y 1.852%,

7Y 2.071%, 10Y 2.230%, 30Y 2.772%