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TREASURIES-Benchmark yields hit highest since June as risk appetite rises
October 11, 2016 / 2:26 PM / in a year

TREASURIES-Benchmark yields hit highest since June as risk appetite rises

* Risk-on trading pushes yields higher
    * 10-year yields hit highest since June jobs report
    * 30-year yields highest since Brexit

    By Dion Rabouin
    NEW YORK, Oct 11 (Reuters) - U.S. Treasury yields rose on
Tuesday with benchmark 10-year notes hitting their highest since
June 3 as risk appetite returned to markets following Friday's
largely in-line U.S. nonfarm payrolls report and Russia's
announcement it would cut oil production in line with OPEC.
    Crude oil futures jumped as much as 3 percent on Monday,
with Brent hitting a one-year high, after Moscow said it was
ready to join the Organization of the Petroleum Exporting
Countries in curbing oil output and Algeria called for similar
commitments from other non-OPEC producers.
    The Treasury market was closed on Monday for the Columbus
Day holiday, but bond futures showed traders selling ahead of
Tuesday's market opening in tandem with the rise in the U.S.
stock market on Monday.
    Bond yields continued to rise on Tuesday even as stocks
traded lower.
    "The higher yields I think are more a result of just a
broader risk-on sentiment that's been gripping markets," said
Aaron Kohli, interest rates strategist at BMO Capital Markets.
"There's been some improvement in global numbers overall and we
don't have the same kind of pressure we did in China...early
this year and last year, so some of those fears of imminent
crash have subsided."
    Friday's data showed nonfarm payrolls rose by 156,000 jobs
in September, missing economists' expectations of 175,000, but
job gains for August were revised up to 167,000 from an
initially reported 151,000. 
    The upward revision for August brought the report from weak
to in-line, analysts said, with market participants betting that
the data was unlikely to keep the Federal Reserve from raising
U.S. short-term interest rates in December. 
    Investors also upped bets that even with a likely rate hike
in December, the Fed would be slow to normalize rates moving
forward.
    "They're deliberately trying to stay behind the curve," said
BMO's Kohli of the Fed. "It's not clear the market believes them
in their ability to counteract too-low inflation, but everyone
has faith that they can counteract too-high inflation."
    Benchmark U.S. 10-year Treasury notes were down
12/32 in price to yield 1.78 percent, the highest since June's
anemic U.S. jobs report torpedoed investor bets on a rate hike
by the Fed that month.
    The 30-year Treasury bond fell 29/32 in price to
2.51 percent, the highest since June 24, the day after Britain's
surprise vote to exit the European Union.

 (Reporting by Dion Rabouin; Editing by Andrea Ricci)

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