October 27, 2017 / 1:48 PM / a year ago

TREASURIES-U.S. 2-year note touches fresh 9-year high after GDP data

    * U.S. Q3 GDP rises 3.0 pct, better than expected
    * Fed on track to raise rates in December
    * U.S. 30-year bond yield falls

 (Updates prices, adds analyst comments, byline, table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 27 (Reuters) - U.S. Treasury two-year note
yields climbed to new nine-year highs on Friday after advance
data showed the world's largest economy grew more than expected
in the third quarter, offsetting the impact of Hurricanes Irma
and Harvey.
    U.S. benchmark 10-year yields initially rose following the
report, but was last trading lower on the day. The U.S. 30-year
bond yield was also weaker despite the strong data.
    Data on Friday showed that U.S. gross domestic product rose
at a 3.0 percent annual rate in the July-September period after
expanding at a 3.1 percent pace in the second quarter.
Economists polled by Reuters had forecast the economy growing at
a 2.5 percent pace in the third quarter.
    "There looks to be no reason for the U.S. Federal Reserve to
back off from an interest rate hike in December as planned,"
said Jacob Deppe, head of trading at online trading platform
Infinox in London.
    "Hurricanes Harvey and Irma had the potential to blow the
U.S. economy off course, particularly as they were expected to
impact on consumer spending and construction. But the US economy
had enough time to bounce back, demonstrating significant
underlying strength and resilience in the third quarter," he
    The rate futures market has priced in a more than 80 percent
chance the Federal Reserve will tighten rates in December,
according to the CME's FedWatch.
    In mid-morning trading, the U.S. two-year note yield rose to
a nine-year peak of 1.639 percent after the GDP data.
It was last at 1.619 percent. 
    U.S. 10-year U.S. Treasury note yields were at 2.446 
percent, down from 2.454 percent late on Thursday.
Earlier in the session, 10-year yields hit a new seven-month
peak of 2.477 percent.
   The highs in the 10-year yields face a key test and a break
of this yield could take it to 2.52 percent as the next key
level, Aaron Kohli, rates strategist at BMO Capital Markets in
New York, said.  
    U.S. 30-year bond yields, however, were at 2.942 percent
, down from 2.961 percent on Thursday.
    "The market is a bit less enthused by the details as we've
seen little in the way of continued selling pressure after an
initial uptick," Kohli said.
      October 27 Friday 9:29AM New York / 1329 GMT
 US T BONDS DEC7               150-31/32    0-8/32    
 10YR TNotes DEC7              124-104/256  0-8/256   
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.085        1.103     -0.005
 Six-month bills               1.25         1.2752    -0.003
 Two-year note                 99-194/256   1.6234    0.004
 Three-year note               99-162/256   1.7528    0.006
 Five-year note                99-170/256   2.0711    0.000
 Seven-year note               99-180/256   2.2962    -0.005
 10-year note                  98-76/256    2.4464    -0.008
 30-year bond                  96-44/256    2.9437    -0.017
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        22.00        -0.25    
 U.S. 3-year dollar swap        21.75        -0.75    
 U.S. 5-year dollar swap         7.00         0.00    
 U.S. 10-year dollar swap       -3.25        -0.25    
 U.S. 30-year dollar swap      -29.50         0.25    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu
Nomiyama and Susan Thomas)
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