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TREASURIES-Yields briefly hit highs on U.S. services price rise
June 13, 2017 / 3:35 PM / 2 months ago

TREASURIES-Yields briefly hit highs on U.S. services price rise

    * Data shows prices for services rose 0.3 percent last month
    * 3-, 2-year yields briefly hit roughly one-month highs
    * Traders await Fed statement Wednesday
    * Treasury to sell $12 billion in 30-year bonds at 1 p.m. ET

    By Sam Forgione
    NEW YORK, June 13 (Reuters) - Short-dated U.S. Treasury
yields briefly hit multi-week highs on Tuesday after data
showing rising U.S. services prices and as traders awaited more
supply, while caution ahead of Wednesday's Federal Reserve
statement prevented the move from gaining traction. 
    The Labor Department said prices for services rose 0.3
percent last month, driven by a 1.1 percent surge in the index
for final demand trade services, which measures changes in
margins received by wholesalers and retailers.
    U.S. three-year Treasury yields hit 1.511
percent, their highest since May 16, while two-year yields 
 touched their highest in a month of 1.367 percent
after the data. 
    Yields eased from their session highs and were last roughly
unchanged from their levels as of late Monday, with three- and
two-year yields last at 1.500 percent and 1.359 percent,
respectively. 
    Traders likely viewed the services price data as a harbinger
of stronger May consumer price index data, which is set for
release Wednesday, said John Herrmann, director of interest
rates strategy at MUFG Securities in New York. 
    That potential inflation pickup would come after recent
readings showing inflation moving away from the Fed's 2 percent
goal, which have been viewed as a potential obstacle to more
hawkish Fed policy. 
    The Fed is scheduled to release its decision at 2 p.m ET
(1800 GMT) on Wednesday at the conclusion of its two-day policy
meeting. Fed Chair Janet Yellen is due to hold a press
conference a half hour later. The Fed is widely expected to
raise its benchmark interest for the second time this year.

    Herrmann of MUFG also said yields were pressured a bit
higher given the risk that the Fed could provide more detail on
its plans to shrink its bond portfolio. 
    "The markets have to build in a little bit of risk that the
Fed may say something about tapering tomorrow," he said. 
    The Treasury will sell $12 billion in 30-year bonds on
Tuesday at 1 p.m. ET (1700 GMT). U.S. 30-year yields were last
at 2.866 percent, compared to 2.868 percent late Monday.
Long-dated yields earlier hit 2.886 percent, their highest since
June 1. 
    "Some of (the earlier move higher in yields) is just ahead
of the supply," said Justin Lederer, an interest rate strategist
at Cantor Fitzgerald in New York.
    Benchmark 10-year Treasuries were last up 1/32
in price to yield 2.207 percent, compared to 2.213 percent late
Monday. 
    
      June 13 Tuesday 11:03AM New York / 1503 GMT
                               Price                  
 US T BONDS SEP7               154-2/32     0-3/32    
 10YR TNotes SEP7              126-92/256   0-8/256   
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.9925       1.0088    0.003
 Six-month bills               1.1125       1.1343    0.005
 Two-year note                 99-202/256   1.3592    0.000
 Three-year note               100          1.5       -0.002
 Five-year note                99-222/256   1.778     0.000
 Seven-year note               99-224/256   2.0193    -0.003
 10-year note                  101-124/256  2.2074    -0.006
 30-year bond                  102-176/256  2.8656    -0.002
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.75         0.75    
 spread                                               
 U.S. 3-year dollar swap        17.50        -0.25    
 spread                                               
 U.S. 5-year dollar swap         7.75         0.75    
 spread                                               
 U.S. 10-year dollar swap       -5.00         0.75    
 spread                                               
 U.S. 30-year dollar swap      -43.25         0.75    
 spread                                               
 
 (Reporting by Sam Forgione; Editing by Andrea Ricci)
  

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