TREASURIES-Yields rise on rate cut doubts, high corporate debt issuance

(Adds investor comments, context, graphic; updates yields)

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Fed rate cut doubts persist amid economic uncertainty

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Government shutdown disrupts key economic data flow

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Tech companies' bond issuance may compete with government borrowing

By Davide Barbuscia

NEW YORK, Nov 3 (Reuters) - U.S. Treasury yields rose on Monday amid high corporate debt issues and as the government bond market kept the bearish tone of last week, when Fed boss Jerome Powell threw cold water on the possibility of additional monetary easing this year. The Federal Reserve cut interest rates by 25 basis points last week, but Powell said there was no certainty there would be additional easing at the Fed's next rate-setting meeting in December, contrary to market expectations, as inflation remains above the central bank's target and the economy, while slowing, continues to hum along. Meanwhile, the government shutdown that started on October 1 could become the longest ever this week, interrupting the flow of key economic data at a moment of uncertainty among policymakers and investors as they try to assess the direction of inflation and a weakening in the jobs market.

"I think we got too far too fast in terms of yields going lower," said Kelly Kowalski, head of investment strategy at MassMutual.

"The market came to price in a lot of Fed cuts and Chair Powell tempered those last week ... even more important than December, this called into question a lot of the cuts that were priced in next year and how the Fed is thinking about those," she said. "A lot of it has to do with the data blackout," she added. Fed officials on Monday continued to voice conflicting views of where the economy stands and the risks facing it, a debate set to intensify in the absence of data suspended due to the shutdown.

The Treasury Department released its

quarterly borrowing estimates

, which showed it expects to borrow $569 billion in the fourth quarter, $21 billion less than its July estimate.

It will announce quarterly

refunding details on Wednesday

, which bond investors will watch closely to assess how the government plans to finance its deficits. Supply considerations, however, extended beyond government issuance, as tech companies have been selling mammoth bonds in the corporate debt market that could compete with the government for borrowed funds. Meta was in the market for a $30 billion bond last week, its biggest bond offering ever, and Google owner Alphabet on Monday tapped the U.S. dollar and euro debt markets with a multi-tranche senior unsecured notes offering expected to be over $17 billion in size, according to IFR News. "I think it really pressured the market, as soon as that deal was announced we started ticking lower (in Treasury prices)," said Tom di Galoma, managing director at Mischler Financial Group.

Heavy corporate bond issuance can weigh on Treasuries, either by diverting investor demand or because companies hedge their borrowing costs by shorting Treasuries to lock in rates ahead of their deals. "There's a lot of rate locking that goes ahead ... they don't want the market to run away from them," said di Galoma. Economic data on Monday showed U.S. manufacturing contracted for an eighth straight month in October as new orders remained subdued. The Institute for Supply Management said on Monday its manufacturing PMI fell to 48.7 last month from 49.1 in September. Treasury yields, which move inversely to prices, inched lower after the data but selling pressure lifted them over the course of Monday's session, as stock markets moved higher.

"There's no drama on the data front, and very positive appetite for risk," said Slawomir Soroczynski, head of fixed income at Crown Agents Investment Management. Benchmark 10-year yields were last at 4.107%, slightly higher than late last week. Two-year yields were last at 3.6%, almost unchanged from Friday. Further out in the curve, 30-year yields rose instead and were last at 4.689%, two basis points higher.

The closely watched part of the yield curve that plots two-year and 10-year Treasury yields steepened to 51 basis points, meaning the premium of long-term bond yields over shorter-dated ones increased, which is often a sign of optimism over the long-term economic outlook.

(Reporting by Davide Barbuscia; Editing by Andrea Ricci)