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TREASURIES-Yields rise as traders reverse reaction to Fed decision
March 16, 2017 / 7:28 PM / 9 months ago

TREASURIES-Yields rise as traders reverse reaction to Fed decision

    * Yields rise from more than one-week lows
    * 10-year yields at 2.524 pct after touching 2.486 pct
overnight
    * Response to Fed rate hike projections seen as overdone
    * Dutch election outcome reduces demand for safe-haven debt

 (Updates prices, adds analyst comment)
    By Sam Forgione
    NEW YORK, March 16 (Reuters) - U.S. Treasury yields rose on
Thursday from more than one-week lows on the view that they had
fallen too sharply in the prior session after the Federal
Reserve maintained its outlook for only a gradual pace of
interest rate increases this year. 
    The Fed, which as expected raised rates for the second time
in three months on Wednesday, said in its policy statement that
further rate increases would be "gradual." Officials stuck to
their outlook for two more rate hikes this year and three more
in 2018.
    Wall Street's top banks also see just two additional rate
rises this year from the U.S. central bank, and most expect at
least three more in 2018, a Reuters poll showed on Wednesday.

    While disappointment with the Fed's outlook pushed yields
lower in a knee-jerk reaction on Wednesday, that sentiment
dissipated on Thursday. 
    "(Treasuries) probably got a little overbought yesterday,"
said David Coard, head of fixed income sales and trading at
Williams Capital Group in New York. "Maybe some people decided
to take a little profit on that move," he said in reference to
the drop in prices and rise in yields Thursday. 
    Benchmark 10-year Treasury notes were last down
5/32 in price, with yields rising to 2.524 percent from 2.504
percent late on Wednesday. They hit a session high 2.538
percent. 
    The move higher in benchmark yields came after they extended
Wednesday's decline in overnight trading on Thursday to hit a
10-day low of 2.486 percent. 
    U.S. 30-year bonds fell 19/32 in price, and
yields rose to 3.134 percent from 3.102 percent. Yields hit a
session high of 3.156 percent in afternoon U.S. Trading.
    Two-year notes, which are considered most
vulnerable to Fed policy, were down slightly in price, while
yields increased to 1.324 percent from 1.316 percent. 
    Two-year yields, which fell more than six basis points on
Wednesday to mark their biggest single-day drop since June,
extended their decline in overnight trading to a 10-day low of
1.299 percent before moving higher. 
    Yields also increased after Dutch center-right Prime
Minister Mark Rutte fought off a challenge by anti-immigration,
anti-European Union rival Geert Wilders to score an election win
seen as a victory against populist nationalism.
    "The fact that Geert Wilders didn’t win the Dutch election
did remove some risk from the markets," said interest rate
strategist Gennadiy Goldberg of TD Securities in New York. 
    
      March 16 Thursday 3:05PM New York / 1905 GMT
                               Price                  
 US T BONDS JUN7               147-24/32    -0-17/32  
 10YR TNotes JUN7              123-136/256  -0-52/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.72         0.7313    -0.008
 Six-month bills               0.86         0.8757    -0.013
 Two-year note                 99-156/256   1.3281    0.012
 Three-year note               100-8/256    1.6142    0.016
 Five-year note                99-62/256    2.0365    0.020
 Seven-year note               98-172/256   2.3329    0.027
 10-year note                  97-144/256   2.5293    0.025
 30-year bond                  97-76/256    3.1399    0.038
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        32.50        -2.00    
 spread                                               
 U.S. 3-year dollar swap        24.50        -1.75    
 spread                                               
 U.S. 5-year dollar swap         9.75        -1.00    
 spread                                               
 U.S. 10-year dollar swap       -4.00        -1.00    
 spread                                               
 U.S. 30-year dollar swap      -39.50        -0.50    
 spread                                               
 
 (Reporting by Sam Forgione; Editing by Lisa Shumaker)
  

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