April 24, 2018 / 9:39 PM / 7 months ago

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

    * Rising yields seen posing trouble for stocks, risky assets
    * 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. sells $32 bln 2-year fixed-rate note to mediocre
demand

 (Updates with yields edging back above 3 pct in late trade)
    By Richard Leong
    NEW YORK, April 24 (Reuters) - The U.S. benchmark 10-year
Treasury yield rose to 3 percent for the first time in more than
four years on Tuesday, reflecting the durability of the U.S.
economic expansion and stoking views the three-decade-old bull
market in bonds is coming to an end.
    Used as a global yardstick for interest rates on everything
from home loans to corporate bonds, the 10-year yield's breach
of the key level was also seen as spelling trouble for riskier
assets that have boomed during the post-financial crisis era of
rock-bottom rates.             
    The bond market's accelerating sell-off since late last week
has 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 U.S. consumer confidence and new home
sales, both stronger in April, bolstered the case that 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 consumers and businesses, undoing much of the expected
benefits from last year's U.S. tax overhaul. Banks and other
companies also have seen their short-term borrowing costs rise
due to the Fed's rate hikes. 
    The 10-year yield's breach above 3 percent added to Wall
Street's woes on Tuesday. The three major U.S. stock indexes
closed down more than 1 percent.             
    "We are heading in a direction that is uncomfortable for
other assets that have benefited from a low-rate environment,"
said George Goncalves, head of U.S. rates strategy at Nomura
Securities International in New York.
    The 10-year Treasury yield             first topped 3
percent in midmorning trade and then pulled back as stocks
faltered. It regained that threshold in late afternoon. The
10-year yield last breached 3 percent in January 2014.
    The 2-year yield            touched 2.500 percent, which was
last seen in September 2008 before subsiding to 2.470 percent,
down 0.4 basis point on the day.
    Analysts are not sure how much further the 10-year yield
will climb.
    If the 10-year yield were to rise to 3.25 percent 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 sold $32
billion in 2-year notes in mediocre demand at a yield of 2.498
percent, the highest since July 2008.             
    It will offer $35 billion of 5-year securities
               on Wednesday along with $17 billion in 2-year
floating-rate notes. It will auction $29 billion of 7-year debt
               on Thursday.
    


    
 (Additional reporting by Lewis Krauskopf; editing by Jonathan
Oatis)
  
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below