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TREASURIES-Yields advance after strong U.S. durables data, Fed chair talk
October 25, 2017 / 2:40 PM / a month ago

TREASURIES-Yields advance after strong U.S. durables data, Fed chair talk

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 25 (Reuters) - U.S. long-dated Treasury yields
rose to multi-month highs on Wednesday, boosted by a strong U.S.
durable goods report, optimism about tax reform and the upcoming
announcement of President Donald Trump's nominee to head the
Federal Reserve.
    Benchmark U.S. 10-year note yields hit seven-month highs,
while yields on 30-year bonds climbed to five-month peaks. U.S.
two-year note yields also advanced, hitting their highest in
nine years.
    Yields extended gains after data showing new orders for key
U.S.-made non-defense capital goods excluding aircraft, a
closely watched proxy for business spending plans, rose 1.3
percent last month after an upwardly revised 1.3 percent
increase in August.
    U.S. shipments rose for an eighth straight month, pointing
to robust business spending that should help mitigate the impact
of recent hurricanes on the economy.
    "The rise in yields was put underway even prior to this
morning's strong durable goods report," said Bill Northey, chief
investment officer at U.S. Bank Wealth Management in Helena,
Montana.
    "If you look across what has happened the last seven to 10
days, there has been additional traction on tax reform, which
has clearly put some upward pressure on rates."
     Northey also pointed to the narrowing of candidates to
three for the Fed chairmanship. Current Fed Chair Janet Yellen,
Stanford University economist John Taylor, and Fed Governor
Jerome Powell were viewed as front-runners for the job.
    Bloomberg reported late on Tuesday that according to
Republican U.S. Senator Tim Scott, Taylor had emerged as the
winner when Trump asked Senate Republicans for a show of hands
in support of potential nominees for the Fed role.
    In mid-morning trading, 10-year U.S. Treasury note prices
were down 13/32, yielding 2.455 percent, up from 
Tuesday's 2.406 percent. Earlier, 10-year yields rose to 2.475
percent, the highest since March 21.
    Traders are now eyeing a key 2.5 percent level.
    U.S. 30-year bond prices fell 26/32, yielding 2.965 percent
, down from 2.923 percent late on Tuesday.
Thirty-year yields had risen to a five-month high of 2.980
percent.
    Later on Wednesday, Treasury will sell $34 billion in 5-year
notes and $15 billion in 2-year floating rate notes.
    Ahead of the auction, U.S. five-year notes were down 6/32 in
price, yielding 2.067 percent. Five-year yields
earlier touched 2.089 percent, their strongest level in more
than seven months.
    U.S. two-year note yields were at 1.602 percent,
up from 1.577 percent the previous session. Earlier on
Wednesday, two-year yields hit a fresh nine-year peak of 1.623 
percent.
    
October 25 Wednesday 10:17 AM New York/1417 GMT
                               Price                  
 US T BONDS DEC7               150-26/32    -0-28/32  
 10YR TNotes DEC7              124-104/256  -0-84/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.1025       1.1209    -0.005
 Six-month bills               1.2525       1.278     0.005
 Two-year note                 99-204/256   1.6029    0.026
 Three-year note               99-174/256   1.7361    0.022
 Five-year note                99-28/256    2.0659    0.039
 Seven-year note               98-244/256   2.2891    0.044
 10-year note                  98-64/256    2.4517    0.046
 30-year bond                  95-208/256   2.9624    0.039
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        22.75        -1.25    
 spread                                               
 U.S. 3-year dollar swap        22.50         0.25    
 spread                                               
 U.S. 5-year dollar swap         7.25         0.00    
 spread                                               
 U.S. 10-year dollar swap       -2.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -28.75         0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith
Mazzilli)
  

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