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TREASURIES-Long bonds outperform on inflation concerns
June 21, 2017 / 1:45 PM / 3 months ago

TREASURIES-Long bonds outperform on inflation concerns

    * Yield curve holds near flattest levels in decade
    * Fed speakers in focus this week
    * BoE's Haldane takes hawkish tone on rate hikes

    By Karen Brettell
    NEW YORK, June 21 (Reuters) - The U.S. Treasury yield curve
held near 10-year lows on Wednesday as investors evaluated the
impact of hawkish Federal Reserve policy on the economy at the
same time inflation measures are deteriorating.
    New York Fed President William Dudley and Boston Fed
President Eric Rosengren both took the view this week that
keeping interest rates low may pose risks to the economy.
                         
    “I think the market may be pricing in a little higher odds
of another rate hike before the end of the year, and that is
helping drive some of the flattening,” said Gennadiy Goldberg,
an interest rate strategist at TD Securities in New York.
    Five-year note yields           , which are highly sensitive
to rate policy, rose to a four-week high of 1.80 percent on
Tuesday. They last traded at 1.78 percent.
    Thirty-year bond yields            , which are largely
driven by future expectations of growth and inflation, meanwhile
dropped to 2.72 percent on Wednesday, the lowest since Nov. 9.
    The yield curve between five-year notes and 30-year bonds
               flattened to 96 basis points, the narrowest since
December 2007.
    With no major economic data due this week investors were
focused on Fed speakers.
    Federal Reserve Board Governor Jerome Powell will speak on
Thursday and Friday. St. Louis Fed President James Bullard and
Cleveland Fed President Loretta Mester are also due to speak on
Friday.
    Hawkish comments from the Bank of England’s chief economist
Andy Haldane were also seen as hurting short-term bonds on
Wednesday.
    Haldane said he would likely vote for a rate hike later this
year, striking a more hawkish tone than BoE Governor Mark Carney
and adding to signs of a split at the central bank.             

 (Editing by Meredith Mazzilli)
  
 
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