April 24, 2018 / 5:24 PM / 7 months ago

TREASURIES-U.S. 10-year yield hits 3 pct as economy shows resilience

    * U.S. consumer confidence bounces, new home sales gain
    * U.S. 2-year yield rise to 2.5 pct, highest since Sept.
2008
    * U.S. 10-year yield touches 3 pct for first time in four
years 
    * U.S. to sell $32 bln two-year, fixed-rate notes 

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, April 24 (Reuters) - The U.S. benchmark 10-year
Treasury yield topped 3 percent for the first time in more than
four years on Tuesday, a milestone that reflects the durability
of the U.S. economic expansion and stokes the view the
three-decade-old bull market in bonds is numbered.
    The bond market sell-off since late last week stemmed from
inflation worries caused by rising commodity prices and growing
Treasury supply, as well as bets the Federal Reserve would
further raise key borrowing costs, analysts said.
    "That we're at a point that we can start to sustain some
rises in bond yields speaks to confidence in the economy. And
that's what is really critical at this point is to follow the
Fed's lead in terms of talking about policy normalization," said
Willie Delwiche, investment strategist at Baird in Milwaukee.
    Tuesday's data on consumer confidence and new home sales,
both stronger in April, bolstered the case the economy will
continue to grow in the coming quarters.
    Some analysts argued that rising bond yields, which mortgage
and other loan rates are based on, would increase borrowing
costs for businesses and consumers, undoing much of the expected
benefits from last year's U.S. tax overhaul.
    At 12:46 p.m. (1646 GMT), the 10-year Treasury yield
 was up 1 basis point at 2.983 percent after rising
to 3.003 percent, which was the highest since January 2014.
    The two-year yield touched 2.500 percent, which
was last seen in September 2008 before subsiding to 2.483
percent, up 1 basis point on the day.
    "These are psychologically and technically notable levels.
They will continue to press higher through the end of the year,"
said Bill Northey, senior vice president with U.S. Bank Wealth
Management in Helena, Montana.
    Analysts are not sure how much further the 10-year yield
will climb.
    "That doesn't mean there may not be some dicey moments
ahead. But for now, it seems like the economy is holding up and
healthy enough to take a few punches," said Mike Loewengart,
vice president of investment strategy at E*Trade Financial Corp.
in New York.
    If the 10-year yield were to rise to 3.25 or higher,
investors may shift more money into Treasuries from stocks and
other risky assets. If it were to stall at current levels,
investors will likely stick with their current allocations,
analysts said.
    On the supply front, the Treasury Department planned to sell
its latest two-year fixed-rate debt on Tuesday. It will offer
$35 billion of five-year securities on Wednesday
along with $17 billion in two-year floating-rate notes. It will
auction $29 billion of seven-year debt on
Thursday.
    Tuesday, April 24 at 1256 EDT (1656 GMT):
                               Price                   
 US T BONDS JUN8               142-23/32    -0-8/32    
 10YR TNotes JUN8              119-80/256   -0-4/256   
                               Price        Current    Net
                                            Yield      Change
                                            (pct)      (bps)
 Three-month bills             1.8325       1.8667     0.042
 Six-month bills               1.995        2.0433     0.005
 Two-year note                 99-144/256   2.4829     0.009
 Three-year note               99-66/256    2.6361     0.003
 Five-year note                98-140/256   2.8174     -0.002
 Seven-year note               98-12/256    2.9383     0.002
 10-year note                  98-12/256    2.9808     0.008
 30-year bond                  97-4/256     3.1551     0.012
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        26.25        -1.00     
 spread                                                
 U.S. 3-year dollar swap        20.50        -0.75     
 spread                                                
 U.S. 5-year dollar swap        10.25         0.00     
 spread                                                
 U.S. 10-year dollar swap        2.50         0.00     
 spread                                                
 U.S. 30-year dollar swap      -12.75         0.25     
 spread                                                
 

    
 (Additional reporting by Lewis Krauskopf; Editing by Dan
Grebler and Richard Chang)
  
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