January 18, 2019 / 5:20 PM / 6 months ago

TREASURIES-U.S. bond yields hit 3-week highs as Wall Street rallies

    * U.S. factory output rises more than forecast in December
    * Hopes for end to U.S.-China trade spat boosts Wall Street 
    * U.S. consumer sentiment sags to weakest since Trump's win
    * U.S. financial markets closed Monday

 (Updates market action, adds graphics)
    By Richard Leong
    NEW YORK, Jan 18 (Reuters) - U.S. Treasury yields rose to
three-week highs on Friday as investors piled back into Wall
Street on hopes Washington and Beijing are moving to end their
trade dispute and stronger-than-expected data on manufacturing
    Bond yields were on track for a second week of increases as
10-year yields climbed further from the near one-year low set
two weeks ago.
    "The risk-on mood has caused yields to move higher," said
John Canavan, market strategist at Stone & McCarthy Research
Associates in New York.
    The S&P 500 index was up 1.21 percent, while the Dow
 was 1.16 percent higher and the Nasdaq was up
1.17 percent.
    The improved outlook on trade came in the aftermath of a
Wall Street Journal report that U.S. Treasury Secretary Steven
Mnuchin was considering lifting some or all tariffs imposed on
Chinese imports. The Treasury denied Mnuchin floated such a
    The yield on benchmark 10-year Treasury notes
hit a three-week peak, last trading at 2.791 percent, 4.4 basis
points above Thursday's close.
    The 10-year yield was poised to increase almost 9 basis
points this week, which would be the biggest weekly rise since
the week of Nov. 2, according to Refinitiv data.
    Treasury yields have risen partly on competition from
higher-yielding corporate bonds. Companies have raised $25.7 
billion through investment-grade debt sales this week, according
to IFR.
    Worries about a slowing U.S. economy eased following a
Federal Reserve report that showed industrial output grew 0.3
percent in December, more than what analysts had forecast.

    But consumer sentiment deteriorated in early January to its
weakest since October 2016, before Donald Trump's presidential
victory, according to the University of Michigan.
    The federal government shutdown, which is in its 28th day,
remains a concern for investors as well as consumers.
    Given the recent batch of mixed data and volatility in the
stock market, Fed officials have signaled they are in no hurry
to raise interest rates again after a rate hike last month.
    Earlier Friday, New York Fed President John Williams said
the U.S. central bank must be patient and guided by data when
deciding whether to raise interest rates.
    U.S. financial markets will be closed on Monday for the
Martin Luther King Jr. holiday.
January 18 Friday 11:54 AM New York/1654 GMT
 US T BONDS MAR9               144-12/32    -21/32    
 10YR TNotes MAR9              121-32/256   -13/32    
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             2.36         2.4063    -0.004
 Six-month bills               2.4375       2.5013    -0.004
 Two-year note                 99-203/256   2.6097    0.046
 Three-year note               99-178/256   2.6068    0.055
 Five-year note                99-254/256   2.6265    0.057
 Seven-year note               99-132/256   2.7019    0.054
 10-year note                  102-216/256  2.7914    0.044
 30-year bond                  105-48/256   3.1067    0.031
         YIELD CURVE           Last (bps)   Net       
 10-year vs 2-year yield       18.00        -0.55     
 30-year vs 5-year yield       48.00        -2.25     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        15.75        -1.00    
 U.S. 3-year dollar swap        11.75        -1.00    
 U.S. 5-year dollar swap         8.75        -0.25    
 U.S. 10-year dollar swap        3.25         0.00    
 U.S. 30-year dollar swap      -18.50         0.50    


 (Reporting by Richard Leong; Editing by Chris Reese)
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