April 20, 2017 / 1:36 PM / 5 months ago

TREASURIES-Yields rise ahead of French election

    * 10-year note yields hit resistance at 2.19 pct
    * French election, North Korea tensions in focus
    * Treasury to sell $16 bln 5-year TIPS

    By Karen Brettell
    NEW YORK, April 20 (Reuters) - U.S. Treasury yields rose on
Thursday as investors waited on the results from the French
election this weekend, after earlier falling to break below key
technical resistance.
    With no major economic data releases 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.
    Benchmark 10-year notes have struggled to stay below
technical resistance at around 2.19 percent, which was tested in
overnight trading, after falling more than 40 basis points in a
month.
    “The 2.19 percent level represents about 50 percent of the
post-election selloff, which is why it’s such a significant
resistance level,” said Thomas Simons, a money market economist
at Jefferies in New York.
     The 10-year notes             were last down 10/32 in price
to yield 2.24 percent. The 10-year yield briefly fell as low as
2.165 percent on Tuesday, the lowest since Nov. 10, and has
tumbled from 2.63 percent on March 14.
    “We’ve come a long way very, very fast so gains up here are
going to be more difficult to get or sustain,” said Mary Ann
Hurley, vice president in fixed income trading at D.A. Davidson
in Seattle.
    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, which had been expected to boost growth.
    “Over the last month, the viability of the Trump economic
agenda is definitely in question,” said Simons.
    Futures traders were pricing in a 57 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.
    Dallas Federal Reserve President Robert Kaplan said on
Thursday that three interest rate hikes this year remains
possible but that the U.S. central bank has the flexibility to
wait and see how the economy unfolds.             
    The Treasury will sell $16 billion in five-year Treasury
Inflation-Protected Securities later on Thursday.

 (Editing by Meredith Mazzilli)
  
 
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