January 17, 2020 / 8:05 PM / a month ago

TREASURIES-U.S. yields rise on economic data, but still rangebound

 (Updates with market activity, analyst comment)
    By Ross Kerber
    BOSTON, Jan 17 (Reuters) - U.S. Treasury yields rose on
Friday after strong homebuilding and manufacturing reports and
upbeat corporate earnings, while traders eyed the potential
impact of a new government bond coming by summer.
    The benchmark 10-year yield was up 2.5 basis
points in afternoon trading at 1.8337%.
     U.S. homebuilding surged to a 13-year high in December
according to federal data released Friday morning, suggesting
the housing market recovery was back on track amid low mortgage
rates and could help support the longest economic expansion on
    The report helped drive the 10-year yield as high as 1.849%
at one point in Friday's session. Analysts have cautioned that
bond market investors don't seem ready to drive the note past
the 2% level even as equity markets hit new highs.
    "It doesn't seem to have gleaned most of the optimism we've
seen in the equity market," said John Herrmann, director of U.S.
interest rates strategy for MUFG. Equity investors seem willing
to find company-specific reasons to look past soft growth and
inflation figures, he said.
    "The bond market is telling you that growth is a little more
moderate" than stock prices suggest, he said.
    Tom Simons, money market economist for Jefferies, said
longer-term yields also may have gotten a boost because of
Thursday's announcement by the U.S. Treasury that it will begin
issuing a new 20-year bond in the first half of 2020 as it seeks
to plug budget deficits expected to top $1 trillion annually.

    "The long end of the curve is more sensitive than it might
otherwise be to positive economic news," Simons said.
    The 30-year bond was up 3.6 basis points at
2.295%. Meanwhile the two-year U.S. Treasury yield,
which typically moves in step with interest rate expectations,
was up less than a basis point at 1.5695%.
    U.S. manufacturing output rose unexpectedly in December as a
drop in motor vehicle output was outpaced by increases in
production of other durable goods, food and beverages, and other
    U.S. stock indexes were at record highs on Friday.
 Shares were driven by optimism over corporate
earnings, upbeat economic data and indications of resilience in
China's economy.
      January 17 Friday 2:54PM New York / 1954 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.53         1.5612    0.002
 Six-month bills               1.5275       1.5647    0.003
 Two-year note                 100-27/256   1.5695    0.002
 Three-year note               99-196/256   1.5807    0.003
 Five-year note                100-144/256  1.631     0.006
 Seven-year note               100-8/256    1.7451    0.012
 10-year note                  99-64/256    1.8337    0.025
 30-year bond                  101-184/256  2.295     0.036
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         7.50         0.75    
 U.S. 3-year dollar swap         4.25         0.75    
 U.S. 5-year dollar swap         1.25         0.75    
 U.S. 10-year dollar swap       -4.50         0.25    
 U.S. 30-year dollar swap      -31.75        -0.75    
 (Editing by Nick Zieminski)
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