February 12, 2018 / 4:28 PM / 3 months ago

TREASURIES-Yields rise on strong U.S. growth outlook; inflation in focus this week

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Feb 12 (Reuters) - U.S. Treasury yields rose
across most maturities on Monday, with benchmark 10-year yields
hitting a four-year high, benefiting from strong U.S. economic
growth prospects and global central banks normalizing years of
easy monetary policy.
    U.S. 10-year yields, which move inversely to prices, have
risen in three of the last five sessions. Since a 10-month low
hit in September, 10-year yields have risen nearly 90 basis
points. The yields' outperformance overall though was being led
by U.S. 7-year and 5-year notes.
    U.S. 30-year yields, meanwhile, climbed to an 11-month high,
but were last down on the day.
    "Yields have been rising because U.S. fundamentals are solid
and also because we're seeing a global normalization of monetary
policy that have driven term premiums higher," said Bruno
Braizinha, interest rates strategist, at Societe Generale in New
York.
    The U.S. equity market, however, has been flustered by the
rise in yields, on concerns it could trigger a surge in
borrowing costs for U.S. corporations and households that could
hamper economic growth.
    On Monday, Wall Street was trading higher and Braizinha said
one reason could be that equity investors believe the current
range in the U.S. 10-year note yield of between 2.80-2.90
percent would hold for now. "I think the stock market is less
stressed about this current level," he added.
    In late morning trading, U.S. 10-year yields
were up at 2.849 percent, from 2.831 percent late on Friday.
Earlier in the session, 10-year yields hit 2.902 percent, the
highest since January 2014.
    U.S. 30-year bond yields fell to 3.123 percent,
from Friday's 3.139 percent. The yield on this maturity touched
an 11-month peak of 3.139 percent earlier in the session.
    Analysts also said concerns about U.S. budget deficit
spending weighed on Treasury prices.
    President Donald Trump will unveil his second budget on
Monday - seeking to make good on his promise to bolster military
spending and requesting funds for infrastructure, construction
of a wall along the border with Mexico and opioid treatment
programs.
    Investors are also bracing for U.S. inflation data this
week, which should shed more light on whether the recent run-up
in yields is justified.
    
      February 12 Monday 11:10AM New York / 1610 GMT
                               Price                  
 US T BONDS MAR8               144-18/32    0-13/32   
 10YR TNotes MAR8              120-236/256  -0-64/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.56         1.5876    0.026
 Six-month bills               1.7175       1.7562    0.020
 Two-year note                 99-218/256   2.0773    0.016
 Three-year note               99-222/256   2.2961    0.032
 Five-year note                99-48/256    2.5502    0.034
 Seven-year note               98-96/256    2.758     0.034
 10-year note                  99-40/256    2.8475    0.016
 30-year bond                  97-128/256   3.1291    -0.010
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        27.50         0.25    
 spread                                               
 U.S. 3-year dollar swap        19.00        -0.25    
 spread                                               
 U.S. 5-year dollar swap         9.00        -0.50    
 spread                                               
 U.S. 10-year dollar swap        0.75         0.25    
 spread                                               
 U.S. 30-year dollar swap      -17.00         2.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Susan
Thomas)
  
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