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TREASURIES-Yields inch up from depressed levels on U.S. data, Fed aftermath
June 15, 2017 / 7:55 PM / 6 months ago

TREASURIES-Yields inch up from depressed levels on U.S. data, Fed aftermath

    * U.S. jobless claims, Philly Fed survey
stronger-than-expected
    * Most yields remain near depressed levels after Wednesday
plunge
    * Two-year yields hit highest in three months
    * Hawkish Bank of England vote pressures yields higher

 (Updates prices, adds comment)
    By Sam Forgione
    NEW YORK, June 15 (Reuters) - Most U.S. Treasury yields
edged higher on Thursday after stronger-than-expected U.S.
economic data and as traders weighed  hawkish Federal Reserve
and Bank of England signals, but remained depressed as they did
not fully reverse their biggest plunge in a month Wednesday.
    Initial claims for state unemployment benefits dropped 8,000
to a seasonally adjusted 237,000 for the week ended June 10, the
Labor Department said on Thursday. Economists had forecast
first-time applications for jobless benefits falling to 242,000
in the latest week.
    In addition, June readings of the New York Fed's Empire
State business conditions index and the Philadelphia Fed
business conditions index both beat economists' expectations.

    Yields on Treasuries maturing between 2-10 years rose, with
two-year yields touching a three-month high of 1.368 percent on
the heels of the Fed's second interest rate increase of the year
on Wednesday. However, 30-year yields were last roughly
unchanged from late Wednesday and the rise in benchmark 10-year
yields only reversed about a third of the extent of Wednesday's
plunge. 
    That drop in yields came after government data on inflation
and retail sales for May fell well short of market expectations.
Analysts said traders continued to doubt the Fed would be able
to raise interest rates for a third time this year, as the
central bank projected Wednesday, given soft inflation readings.
    "At some point, (Fed) policymakers are going to have to
recognize that, if inflation remains low, they’re not going to
be able to pursue further hikes," said Guy LeBas, chief fixed
income strategist at Janney Montgomery Scott LLC in
Philadelphia.
    Analysts also said yields were pressured higher after the
Bank of England's Monetary Policy Committee came its closest to
voting for a rate rise since 2007 this week.
    Along with the rise in two-year yields, three-year yields
 briefly jumped above 1.5 percent after hitting 1.417
percent Wednesday. Short-dated yields are most sensitive to Fed
rate movements.
    Benchmark 10-year Treasury yields were last at
2.160 percent, from 2.138 percent late Wednesday. Benchmark
yields hit 2.103 percent Wednesday, their lowest since Nov. 10. 
    "There is still a lot of uncertainty" about U.S. growth,
said Kim Rupert, managing director for fixed income at Action
Economics in San Francisco. 
    Other data showing import prices recorded their biggest drop
in 15 months in May suggested domestic inflation measures could
remain soft for a while. That low inflation outlook helped keep
long-dated yields anchored, Rupert said. 
    
    June 15 Thursday 3:32PM New York / 1932 GMT
                               Price                  
 US T BONDS SEP7               155-14/32    -0-6/32   
 10YR TNotes SEP7              126-168/256  -0-68/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1            1.0164    0.005
 Six-month bills               1.105        1.1266    0.008
 Two-year note                 99-204/256   1.3555    0.012
 Three-year note               100-4/256    1.4947    0.022
 Five-year note                99-244/256   1.7599    0.035
 Seven-year note               100-28/256   1.983     0.031
 10-year note                  101-228/256  2.162     0.024
 30-year bond                  104-76/256   2.7872    0.004
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        18.75         0.25    
 spread                                               
 U.S. 3-year dollar swap        16.50        -0.50    
 spread                                               
 U.S. 5-year dollar swap         7.75        -0.75    
 spread                                               
 U.S. 10-year dollar swap       -2.50        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -36.75         0.50    
 spread                                               
  

 (Reporting by Sam Forgione; Editing by Chris Reese and Chizu
Nomiyama)
  

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