September 18, 2014 / 2:26 PM / 3 years ago

TREASURIES-Prices slip as Fed forecasts boost short-maturity yields

* Shorter maturity yields reach highs

* Fed rate forecasts spur selling

By Michael Connor

NEW YORK, Sept 18 (Reuters) - U.S. Treasury debt prices turned down on Thursday, with investors driving some shorter-maturity yields to highs not seen since 2011 after the Federal Reserve on Wednesday raised forecasts for some interest rates.

Yields on two-year notes touched a high of 0.597 percent before settling back to 0.585 percent on a 2/32 price decline. That level was last seen in May 2011.

Three- and five-year yields were also up sharply. Prices for three-year notes were off 4/32, taking their yield to 1.117 percent, a level last touched during April 2011.

Five-year notes were off 7/32 in price and yielding 1.851 percent after touching 1.874 percent.

On Wednesday, after a two-day meeting, Fed policymakers issued a policy statement and outlooks that largely soothed investors’ fears the U.S. central bank was quickening its shift to raising interest rates.

But the outlook included forecasts of higher-than-expected rates for loans among banks during 2015 and 2016.

“The concrete message yesterday was a faster rate forecast from the Fed members themselves,” said Jim Vogel, interest rate strategist at FTN Financial in Memphis. “And the fact they did that with a flat to down economic forecast reduces the willingness of traders to believe the Fed when it says it is data dependent.”

Yields on benchmark 10-year Treasury notes were up to 2.63 percent on a price decline of 8/32 after briefly touching a session high of 2.642 percent on mixed economic data on America’s labor and housing markets.

Prices of 30-year Treasuries were off 2/32 and yielded 3.368 percent.

Early on Thursday, the government reported that the number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting a sharp slowdown in job growth last month was probably an aberration.

Other data on Thursday showed housing starts declined in August, while upward revisions for groundbreaking in July offered hope the housing market was gradually continuing to improve. (Reporting by Michael Connor in New York; Editing by James Dalgleish)

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