April 12, 2019 / 3:11 PM / 2 months ago

TREASURIES-U.S. yields hit 3-week highs as China data stokes risk appetite

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 12 (Reuters) - U.S. Treasury yields rose to
three-week highs on Friday as risk appetite increased after data
showed Chinese exports rebounded in March, easing concerns about
slowing global growth.
    "This move in yields is driven largely by stronger data out
of China overnight," said Bill Merz, head of fixed income
research at U.S. Bank Wealth Management in Minneapolis.
    Data showed that China's exports rose 14.2% in March from a
year earlier, although imports contracted for a fourth straight
month.
    U.S. yields have risen for two straight sessions on both the
long and short end, fueled as well by generally solid U.S.
economic data this week.
    Friday's reports were upbeat overall with U.S. import prices
beating expectations and U.S. consumer sentiment stabilizing,
with yields holding their gains.
    "This print (U.S. consumer confidence) simply confirms that
consumer confidence is stabilizing at a strong but lower
plateau," said Jon Hill, interest rates strategist, at BMO
Capital Markets in New York. "This makes sense given ongoing
strength in the labor market, near record levels in equities."
    U.S. data for 2019 so far paints a picture of an economy
that is not likely to go into recession, contrary to signals
from the rates market that the Federal Reserve may have to ease
monetary policy soon.
    "Bottomline, the market is pricing in half a rate cut this
year and about one cut next year. That has moderated from
extreme levels recently. But the current U.S. economic data
doesn't really support that," U.S. Bank's Merz said.
    In mid-morning trading, U.S. 10-year note yields were
higher, at 2.545%, up from 2.504% late on Thursday.
    Yields on U.S. 30-year bonds were also higher, at 2.961%
, up from 2.937% on Thursday.
    On the short end of the curve, U.S. 2-year yields edged up
to 2.385%, compared with Thursday's 2.356%.
    All three maturities hit three-week peaks on Friday.
    "For now, we expect continued upward pressure on bond
yields," Merz said.
    U.S. yields also moved in line with the European bond
market, with 10-year German bind yields rising to three-week
highs.
    
      April 12 Friday 10:49AM New York / 1449 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.38         2.427     -0.002
 Six-month bills               2.395        2.4574    -0.002
 Two-year note                 99-190/256   2.3852    0.029
 Three-year note               99-184/256   2.3476    0.041
 Five-year note                98-230/256   2.3616    0.048
 Seven-year note               98-184/256   2.4513    0.046
 10-year note                  100-184/256  2.5417    0.038
 30-year bond                  100-200/256  2.9603    0.023
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.75         1.00    
 spread                                               
 U.S. 3-year dollar swap         6.50         0.75    
 spread                                               
 U.S. 5-year dollar swap         2.75        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.00        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -25.25         0.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss)
  
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