April 12, 2019 / 7:26 PM / 13 days ago

TREASURIES-U.S. yields rise, touch 3-week peaks as risk appetite rises

    * China data boosts risk appetite, U.S. yields
    * U.S. consumer sentiment generally stable
    * U.S. yield curve steepens as recessionary fears ease

 (New throughout, updates prices, yields, market activity and
comment)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 12 (Reuters) - U.S. Treasury yields rose to
three-week highs on Friday as investors put money into riskier
assets after data showed Chinese exports rebounded in March,
easing concerns about global economic growth.
    The yield curve has also steepened, diminishing fears of a
U.S. recession, analysts said.
    "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 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.
    Upbeat U.S. reports on Friday showed import prices beating
expectations and consumer sentiment stabilizing.
 Analysts said U.S. data for 2019 so far
indicates a recession is not likely, contrary to signals from
the rates market that the Federal Reserve may have to ease
monetary policy soon.
    For example, MUFG Securities models continue to forecast
three interest rate cuts by the June 2020 Fed meeting. The
bank's models show a 97 percent probability the Fed will cut
rates by 25 basis points at the July meeting, said John Hermann,
MUFG rates strategist.
    But U.S. Bank's Merz said to justify a rate cut this year or
next, "we would need to see a material deterioration in the
economic data." He said that while signs show the U.S. economy
is slowing, it is "slowing from a really good place."
    In afternoon trading, U.S. 10-year note yields were 2.556%
, up from 2.504% late on Thursday. Over the last two
weeks, 10-year yields have risen more than 13 basis points.
    Yields on U.S. 30-year bonds were 2.968%, up
from 2.937% on Thursday.
    On the short end, U.S. 2-year yields edged up to 2.385% from
Thursday's 2.356%.
    Yields for all three maturities hit three-week peaks.
    "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 bund yields rising to three-week
highs.
    The yield spread between U.S. 2-year and 10-year notes has
widened to 16.5 basis points, steepening the
curve.
    
      Friday, April 12 at 1506 EDT (1906 GMT):
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.3875       2.4347    0.006
 Six-month bills               2.3975       2.46      0.001
 Two-year note                 99-185/256   2.3955    0.039
 Three-year note               99-174/256   2.3612    0.054
 Five-year note                98-212/256   2.3768    0.063
 Seven-year note               98-156/256   2.4686    0.064
 10-year note                  100-140/256  2.5615    0.058
 30-year bond                  100-136/256  2.9729    0.036
                                                      
   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         3.00         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.75         0.00    
 spread                                               
 U.S. 30-year dollar swap      -25.00         0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Stephen
Orlofsky and David Gregorio)
  
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