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TREASURIES-Yields jump on global central bank policy, oil price rise
July 6, 2017 / 3:33 PM / 2 months ago

TREASURIES-Yields jump on global central bank policy, oil price rise

    * Traders grapple with hawkish central bank shift
    * Oil price rise signals inflationary pressure
    * 10-year yields hit nearly 8-week high
    * 2-yr yields hit more than 8-year high in early trading

    By Sam Forgione
    NEW YORK, July 6 (Reuters) - U.S. Treasury yields rose on
Thursday, with benchmark yields touching nearly eight-week
highs, on the prospect of hawkish global central bank policy and
as rising oil prices suggested inflationary pressures. 
    Analysts said traders were still grappling with hawkish
comments from the heads of the European Central Bank and Bank of
England last week, which would be negative for safe-haven
government bonds in Europe and the United States. 
    Those concerns, along with the rising oil prices and traders
anticipating that the Fed will begin unwinding its bond holdings
later this year, led traders to sell Treasuries even as U.S.
June private payrolls data disappointed expectations.

    "You’re seeing some liquidation as people are trying to wrap
their heads around what the central banks have in mind," said
Lou Brien, a market strategist at DRW Trading in Chicago.
    Longer-dated yields were last rising the most among all
Treasury maturities, with 30-year yields up about six basis
points from Wednesday's closing level at 2.918 percent. Those
yields hit a six-week high of 2.923 percent. 
    Benchmark 10-year yields were last up the second-most on the
day, with those yields touching a nearly eight-week high of
2.391 percent. 
    While shorter-dated yields were not up as much as long-dated
yields, they still hit peaks in early trading with two-year
yields hitting a more than eight-year high of 1.435
percent and three-year yields touching a roughly
3-1/2-month high of 1.617 percent. 
    Minutes from the Fed's June meeting on Wednesday showed that
several officials wanted to announce a start to the process of
reducing the Fed's large portfolio of Treasury bonds and
mortgage-backed securities by the end of August but others
wanted to wait until later in the year.
    "Most people would say it's pretty clear the Fed is going to
start this whole unwinding of the balance sheet," said Stan
Shipley, fixed income strategist at Evercore ISI in New York.
"That’s not good news by itself for long-end Treasuries." 
    U.S. five-year Treasury yields hit a more than
three-month high of 1.968 percent while seven-year yields
 hit an eight-week high of 2.228 percent. 
    Analysts said rising oil prices also sent longer-dated
yields higher. U.S. crude was last up 2.5 percent at $46.25 per
barrel. 
    The private payrolls data came ahead of the Labor
Department's broader U.S. June nonfarm payrolls report on
Friday. Economists polled by Reuters expect U.S. employers to
have added 179,000 jobs last month, above May's meager 138,000. 
    
    July 6 Thursday 11:21AM New York / 1521 GMT
                               Price                  
 US T BONDS SEP7               152          -1-11/32  
 10YR TNotes SEP7              124-224/256  -0-88/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.0225       1.0394    -0.011
 Six-month bills               1.125        1.1471    -0.003
 Two-year note                 99-174/256   1.4145    0.000
 Three-year note               99-182/256   1.601     0.017
 Five-year note                99-8/256     1.955     0.030
 Seven-year note               98-152/256   2.2185    0.041
 10-year note                  99-236/256   2.3838    0.050
 30-year bond                  101-168/256  2.9164    0.061
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        24.25         0.00    
 spread                                               
 U.S. 3-year dollar swap        20.25        -1.00    
 spread                                               
 U.S. 5-year dollar swap         7.25        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.50        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -29.50        -1.00    
 spread                                               
 
 (Reporting by Sam Forgione; Editing by Jonathan Oatis)
  

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