April 19, 2017 / 1:19 PM / 4 months ago

TREASURIES-Yields rise on technical resistance, improving risk sentiment

    * Bonds weaken to key technical yield levels
    * Rising stocks reduce demand for bonds
    * Boston Fed's Rosengren to speak later on Wednesday
    * Fed to release Beige Book on economic conditions

    By Karen Brettell
    NEW YORK, April 19 (Reuters) - U.S. Treasury yields rose on
Wednesday as 10-year notes reached key technical resistance
after a rally on Tuesday sent yields to five-month lows, and as
rising stocks indicated improving risk sentiment.
    Benchmark 10-year Treasury note yields rose back above the
2.20 percent level, where there is technical resistance.
    “We’re consolidating and looking for the next big trade,
whether it is a reversal of the rally or an extension of it,”
said Ian Lyngen, head of U.S. rates strategy at BMO Capital
Markets in New York.
    Lyngen noted that the 2.20 percent to 2.25 percent yield
levels on the 10-year note are significant from a technical
perspective because “there is a bit of a volume bulge there.”
    The 10-year notes             were last down 6/32 in price
to yield 2.20 percent. The 10-year yield fell as low as 2.165
percent on Tuesday and has tumbled from a recent high of 2.63
percent hit on March 14.
    U.S. stocks also rose on Wednesday, reducing the safe-haven
bid for bonds.             
    With no major economic releases due this week investors were
focused on the French elections, U.S. tensions with North Korea
and any new indications on when the Trump administration is
likely to undertake tax and fiscal reforms.
    Centrist Emmanuel Macron held on to his lead as favorite to
win France's presidential election, a closely watched poll
showed, although it indicated that the first round of voting at
the weekend remained too close to call.             
    U.S. Vice President Mike Pence said that Washington would
work with its allies and China to put economic and diplomatic
pressure on North Korea but added that the United States would
defeat any attack with an "overwhelming response."             
    Bonds prices have been boosted in recent weeks by reduced
expectations that the Federal Reserve will raise interest rates
two more times this year following disappointing economic data
releases. The administration of U.S. President Donald Trump is
also seen as less likely to pass fiscal or tax reforms in the
near term.
    Futures traders were pricing in a 49 percent chance the U.S.
central bank will raise rates at its June meeting, down from 71
percent on April 6, according to the CME Group’s FedWatch Tool.
    Boston Fed President Eric Rosengren was due to speak later
on Wednesday. The U.S. central bank will also release its Beige
Book compendium of economic conditions.

 (Editing by Meredith Mazzilli)
  
 
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