* Benchmark yields hit highest level since Sept 2014
* Oil futures rise, boosting inflation outlook
* U.S. Treasury auctions show tepid results
(Adds new comment, results of bond auctions, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 12 U.S. Treasury yields rose on
Monday, with benchmark 10-year notes climbing to more than
two-year peaks, after oil prices increased and as investors
braced for a widely expected interest rate increase from the
Federal Reserve this week.
Yields, however, came off their highs in late trading as
U.S. stocks lose steam.
Gennadiy Goldberg, interest rates strategist at TD
Securities in New York, said investors were unsure whether they
should buy U.S. 10-year Treasuries with prices at these low
levels ahead of the Fed decision on Wednesday.
"We went to a key level earlier on at 2.50 percent in the
10-year, and while 2.50 seems attractive, we think it can back
up some more," he added.
U.S. 30-year bond yields also advanced on Monday, hitting
17-month highs, while those on two-year and three-year notes hit
A rebound in crude prices reinforced the notion that U.S.
inflation is on the rise with expectations of fiscal stimulus
from the Trump administration. Higher inflation tends to depress
bond prices, with longer-dated bonds typically more sensitive to
Yields also edged higher after underwhelming auctions for
U.S. three-year and 10-year notes.
The U.S. 10-year note fetched a high yield of 2.485 percent
compared with 2.479 percent expected at the bid deadline,
suggesting weak demand. Bids totaled $47.7 bln for a 2.39 cover,
a little better than the 2.22 last month, but below the 2.54
"We had expected a stronger result as outright levels are
fairly good and the 10-year had decent concession on the curve,"
said Aaron Kohli, interest rates strategist at BMO Capital
Markets in New York, referring to the fact that U.S. 10-year
notes have cheapened considerably given the post-U.S. election
"The small tail is an admitted disappointment against the
broader backdrop of a healthy concession and likely means that a
further backup is needed in 30-year yields in order to get the
long-bond auction done," he added.
The U.S. government will auction $12 billion in 30-year
bonds on Tuesday.
The Treasuries supply comes before a widely expected
quarter-point rate increase from the Fed at its two-day policy
meeting on Tuesday and Wednesday.
In late trading, U.S. 10-year notes were down
4/32, while the yield rose to 2.478 percent from 2.464 percent
late on Friday. Earlier, the yield touched 2.528 percent, its
highest since Sept. 29, 2014.
U.S. 30-year bonds were down 4/32 with a yield
of 3.160 percent, after rising to 3.215 percent, the highest
since July 2015.
U.S. three-year notes were flat at 1.407 percent after
earlier hitting a two-week high of 1.457 percent.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Richard Leong; Editing by Chizu Nomiyama and Lisa Von Ahn)