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TREASURIES-Yields surge, tracking stocks after McCain backs U.S. Senate tax bill
November 30, 2017 / 7:07 PM / 14 days ago

TREASURIES-Yields surge, tracking stocks after McCain backs U.S. Senate tax bill

    * McCain backs U.S. Senate tax bill
    * U.S. data on Thursday supportive of U.S. yields

 (Adds McCain, comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 30 (Reuters) - U.S. Treasury yields rose
sharply on Thursday, in line with the steep rally on Wall
Street, on news that Senator John McCain had endorsed the U.S.
Senate tax bill, potentially easing challenges to its eventual
passage in Congress.
    Yields on U.S. 10-year notes surged to five-week peaks,
while those on two-year notes hit a fresh nine-year high just
shy of 1.8 percent.
    Yields on U.S. 30-year Treasuries rose to a new two-week
high.
    McCain, who was instrumental in defeating the Republican
push to overturn Obamacare earlier this year, said the bill was
"far from perfect" but would boost the economy and provide tax
relief for all Americans.
    The rise in yields coincided with the rally in stocks,
getting a boost from McCain's support of the tax bill, said Lou
Brien, market strategist, at DRW Trading in Chicago.
    "McCain was one of those viewed as potentially opposing the
tax bill. His support meant that the tax bill is moving in the
right direction," Brien added.
    The Republican-controlled Senate is expected to begin a
potentially chaotic "vote-a-rama" on amendments from Republicans
and Democrats before moving to a final vote late on Thursday or
early on Friday.
    Earlier, U.S. yields got a boost from U.S. data showing a
rise in inflation and a decline in jobless claims, reinforcing
expectations of an interest rate increase next month and several
more in 2018.
    The Federal Reserve's preferred inflation measure, the
personal consumption expenditures price index excluding food and
energy, rose 0.2 percent in October after a similar gain in
September.
    "Today's inflation data was enough to let bond yields drift
back up to the highs at the long end of the curve," said Jim
Vogel, interest rates strategist at FTN Financial in Memphis.
    The Fed is widely expected to raise rates at next month's
monetary policy meeting and has forecast three more rate hikes
next year. 
    U.S. initial jobless claims data also lifted yields earlier.
The report showed that jobless claims slipped to a seasonally
adjusted 238,000 for the week ended Nov. 25.
    In early afternoon trading, the 10-year Treasury yield
 was up at 2.386 percent, from 2.376 percent late on
Wednesday. It hit a five-week high of 2.437 percent earlier in
the session.
    U.S. two-year yields hit a nine-year high of
1.798 percent, from 1.762 percent on Wednesday. Two-year notes
are the maturity most sensitive to rate hike expectations.
    U.S. 30-year bond yields were up at 2.863
percent from Wednesday's 2.817 percent. Earlier, 30-year yields
hit a two-week high of 2.869 percent.
    
    Thursday, Nov. 30 at 1347 EST (1847 GMT):
                               Price                    
 US T BONDS MAR8               151-4/32     -1-2/32     
 10YR TNotes DEC7              124-56/256   -0-128/256  
                               Price        Current     Net
                                            Yield       Change
                                            (pct)       (bps)
 Three-month bills             1.255        1.2764      -0.013
 Six-month bills               1.415        1.4449      -0.008
 Two-year note                 99-234/256   1.794       0.032
 Three-year note               99-140/256   1.9083      0.049
 Five-year note                99-72/256    2.1525      0.059
 Seven-year note               98-172/256   2.3318      0.064
 10-year note                  98-100/256   2.4329      0.057
 30-year bond                  97-188/256   2.8631      0.046
                                                        
   DOLLAR SWAP SPREADS                                  
                               Last (bps)   Net Change  
                                            (bps)       
 U.S. 2-year dollar swap        17.75         0.00      
 spread                                                 
 U.S. 3-year dollar swap        17.25        -0.50      
 spread                                                 
 U.S. 5-year dollar swap         5.50        -0.75      
 spread                                                 
 U.S. 10-year dollar swap       -1.50        -0.25      
 spread                                                 
 U.S. 30-year dollar swap      -24.00        -0.25      
 spread                                                 
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith
Mazzilli and Richard Chang)
  

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