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TREASURIES-Yields plunge after Fed hikes rates, sticks to outlook
March 15, 2017 / 6:50 PM / 7 months ago

TREASURIES-Yields plunge after Fed hikes rates, sticks to outlook

    * Fed hikes rates for second time in three months
    * Fed sticks to outlook for two more rate hikes this year
    * 2-, 3-year yields fall from multiyear highs to 8-day lows
    * Long-, medium-dated yields also fall

 (Updates prices, adds analyst comments)
    By Sam Forgione
    NEW YORK, March 15 (Reuters) - U.S. Treasury yields
plummeted on Wednesday after the Federal Reserve raised interest
rates for the second time in three months as expected, but did
not flag any plan to accelerate the pace of monetary tightening.
    U.S. two- and three-year yields, which are most vulnerable
to Fed policy, fell from multiyear highs touched during morning
U.S. trading after the Fed said in its policy statement that
further rate increases would only be "gradual," with officials
sticking to their outlook for two more rate hikes this year and
three more in 2018.
    The decision to lift the target overnight interest rate by
25 basis points to a range of 0.75 percent to 1.00 percent
marked one of the Fed's most convincing steps yet in the effort
to return monetary policy to a more normal footing.
    "Many in the market had positioned for a bit more of a
hawkish-sounding Fed in the statement and the (outlook) than was
actually delivered," said Mark Cabana, head of U.S. short rates
strategy at Bank of America Merrill Lynch in New York.
    U.S. two- and three-year yields sank to eight-day lows after
the statement of 1.308 percent and 1.598 percent, respectively.
Those yields had touched their highest since June 2009 and April
2010, respectively, before the statement. 
    U.S. long- and medium-dated yields also fell, with 30-year
 and benchmark 10-year yields hitting
one-week lows of 3.114 percent and 2.513 percent, respectively.
Seven- and five-year yields hit eight-day
lows of 2.312 percent and 2.021 percent, respectively. 
    Benchmark 10-year Treasuries were last up 17/32 in price to
yield 2.533 percent, from a yield of 2.595 percent late Tuesday.
    
 Wednesday, March 15 at 1430 EDT (1830 GMT):
                               Price                   
 US T BONDS JUN7               147-24/32    0-29/32    
 10YR TNotes JUN7              123-128/256  0-160/256  
                               Price        Current    Net
                                            Yield      Change
                                            (pct)      (bps)
 Three-month bills             0.74         0.7517     -0.023
 Six-month bills               0.8775       0.8937     -0.038
 Two-year note                 99-152/256   1.336      -0.044
 Three-year note               100          1.625      -0.059
 Five-year note                99-46/256    2.0498     -0.073
 Seven-year note               98-160/256   2.3403     -0.074
 10-year note                  97-132/256   2.5347     -0.060
 30-year bond                  97-112/256   3.1325     -0.041
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        33.50         1.00     
 spread                                                
 U.S. 3-year dollar swap        26.00         1.00     
 spread                                                
 U.S. 5-year dollar swap        10.75         1.00     
 spread                                                
 U.S. 10-year dollar swap       -2.75         0.50     
 spread                                                
 U.S. 30-year dollar swap      -37.75         0.50     
 spread                                                
    

 (Reporting by Sam Forgione; Editing by Chizu Nomiyama and Lisa
Shumaker)
  

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