March 29, 2019 / 1:37 PM / 3 months ago

TREASURIES-Yields rise as improving risk appetite boosts stocks

    * Stock markets rise into quarter-end
    * Consumer spending disappoints in January
    * Three-month, 10-year yield curve trades near flat

    By Karen Brettell
    NEW YORK, March 29 (Reuters) - U.S. Treasury yields rose on
Friday as risk sentiment improved, boosting stocks and reducing
demand for safe haven bonds, though prices briefly gave up some
losses after data showed that U.S. consumer spending rebounded
less than expected in January.
    U.S. stock indexes rose on the last trading day of the
quarter as the latest round of U.S.-China trade talks ended on a
positive note     
    “After days of letting stocks fall just for lack of a better
story we’re seeing some bidding into quarter-end, and that
reduces the enthusiasm to rush to buy Treasuries,” said Jim
Vogel, an interest rate strategist at FTN Financial in Memphis,
Tennessee.
    Treasury prices were briefly bid higher, however, after the
Commerce Department said that consumer spending, which accounts
for more than two-thirds of U.S. economic activity, edged up 0.1
percent as households cut back on purchases of motor vehicles.
    Incomes also rose modestly in February, suggesting the
economy was fast losing momentum after growth slowed in the
fourth quarter.             
    Benchmark 10-year notes             were last down 10/32 in
price to yield 2.425 percent, after dropping to 2.340 percent in
overnight trading on Thursday, the lowest since December 2017.
    The yield curve between three-month bills and 10-year notes
turned slightly positive, after being inverted for a week. 
    Analysts say that the yield curve inversion needs to persist
for at least a few weeks in order to be a probable indicator of
a recession, which may come one-to-two years later.
    Treasuries have rallied strongly since the Federal Reserve
last week dramatically abandoned projections for any interest
rate hikes this year.             
    Interest rate futures traders are now pricing in a 66
percent chance of a rate cut by December, according to the CME
Group's FedWatch Tool.

  
 
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