June 29, 2017 / 1:41 PM / 2 months ago

TREASURIES-Yields rise as European central banks seen as less accommodative

    * Treasury yields rise in sympathy with weaker European
bonds
    * Inflation data on Friday in focus

    By Karen Brettell
    NEW YORK, June 29 (Reuters) - Benchmark U.S. Treasury yields
rose to five-week highs on Thursday in sympathy with weaker
European government debt, as investors evaluated the likelihood
that central banks in Europe will soon become less
accommodative.
    European Central Bank President Mario Draghi said on Tuesday
the ECB might tweak its stimulus so it does not become more
accommodative as the economy recovers, though sources said on
Wednesday he had not intended to signal imminent tightening.
                         
    Also on Wednesday, Bank of England Governor Mark Carney said
a rise in British interest rates is likely to be needed as the
economy comes closer to running at full capacity.             
    Germany's 10-year government bond yield rose             to
a seven-week high, dragging Treasury yields higher with it.
            
    “What’s going on in Europe is really what’s driving us
here,” said Brian Daingerfield, a macro strategist at NatWest
Markets in Stamford, Connecticut.
    Benchmark 10-year notes             were last down 19/32 in
price to yield 2.29 percent, the highest since May 24 and up
from 2.22 percent late on Wednesday.
    Attention is expected to return to the U.S. economy on
Friday when personal income and consumption data will be
evaluated for inflation signals.
    The yield curve has flattened dramatically in the past month
on concerns about weakening price pressures.
    “Tomorrow’s PCE (Personal Consumption Expenditures) deflator
print is going to be an important read for markets in trying to
assess how much patience the Fed can have for assessing when to
make their next move on rates,” said Daingerfield.
    The yield curve between five-year notes and 30-year bonds
               steepened to 96.40 basis points on Thursday,
after falling as low as 91.90 basis points on Wednesday, the
flattest since late 2007.
    Data on Thursday showed the U.S. economy slowed less sharply
in the first quarter than initially estimated due to
unexpectedly higher consumer spending and a bigger jump in
exports.             
    The number of Americans filing for unemployment benefits
edged up last week, but the underlying trend remained consistent
with a tight labor market, other data showed.             

 (Editing by Meredith Mazzilli)
  
 
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