September 13, 2019 / 2:27 PM / 2 months ago

TREASURIES-U.S. yields rise to multi-week highs on receding trade tensions, data

    * U.S. retail sales rise more than expected
    * China exempts some U.S. goods from additional tariffs
    * Highest weekly rise since Nov 2016 seen for 10-,30-year
yields
    * Largest weekly gain since June 2009 for U.S. 2-year yield 

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updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 13 (Reuters) - U.S. Treasury yields climbed
to multi-week peaks on Friday, as trade tensions between the
United States and China eased further after more conciliatory
measures, with U.S. recession risks continuing to diminish after
stronger-than-expected retail sales data.
    Yields on U.S. benchmark 10-year notes and 30-year bonds hit
five-week highs, while those on two-year notes touched their
highest in six weeks. Both 10-year and 30-year yields were on
track for their largest weekly rise since U.S. President Donald
Trump's election in November 2016.
    The U.S. two-year yield was on pace for its highest weekly
increase since June 2009.
    "We have the continued warming of relationships over the
trade talks. And we have the consumer still strong with retail
sales and those two just added fuel to the fire," said Ellis
Phifer, market strategist at Raymond James in Memphis,
Tennessee. 
    "Have we turned the corner in rates? I don't know if it's a
complete turn. We have had a reversal for now, but we have trade
talks coming up and we have the Federal Reserve meeting coming
up. There is a lot of potential news that could turn us back
around."
    On Friday, China's official Xinhua News Agency reported that
Beijing will exempt some agricultural products from additional
tariffs on U.S. goods. The United States and China have both
made amicable gestures, with China renewing purchases of U.S.
farm goods and Trump delaying a tariff increase on certain
Chinese goods.
    On the data front, U.S. retail sales increased more than
expected in August, rising 0.4%, lifted by spending on motor
vehicles, building materials, healthcare and hobbies. The
average forecast was for a 0.2% gain in August. 
    Excluding automobiles, gasoline, building materials and food
services, retail sales climbed 0.3% last month after rising by a
downwardly revised 0.9% in July.
    "The resilience of core inflation and control retail
spending may reduce the forward markets odds of a rate cut in
October to lower than 45%," said John Herrmann, rates strategist
at MUFG Securities Americas in New York.
    In mid-morning trading, U.S. benchmark 10-year note yields
 rose to 1.827% from 1.791% late on Thursday, hitting
a fresh five-week high of 1.843% after the retail sales data.
    Yields on 30-year bonds were also higher at 2.301%
 from 2.264% on Thursday, touching a five-week high
as well of 2.317%.
    U.S. two-year yields, on the other hand, hit a six-week peak
of 1.767% following the retail sales data. They were last up at
1.744%, from Thursday's 1.727%.
    
      September 13 Friday 10:01 AM New York/1401 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.9175       1.9585    0.003
 Six-month bills               1.85         1.8982    0.000
 Two-year note                 99-132/256   1.7529    0.026
 Three-year note               99-106/256   1.7013    0.029
 Five-year note                97-240/256   1.6855    0.035
 Seven-year note               97-124/256   1.7608    0.033
 10-year note                  98-40/256    1.8291    0.038
 30-year bond                  98-216/256   2.3037    0.040
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -0.50         1.25    
 spread                                               
 U.S. 3-year dollar swap        -3.50         0.75    
 spread                                               
 U.S. 5-year dollar swap        -6.00         0.75    
 spread                                               
 U.S. 10-year dollar swap      -11.50         0.50    
 spread                                               
 U.S. 30-year dollar swap      -41.50         1.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Kevin
Liffey)
  
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