Home Bonds News TREASURIES-U.S. yields rise on economic data, but still rangebound

TREASURIES-U.S. yields rise on economic data, but still rangebound

by FxFinanceStockNews


(Updates with market activity, analyst comment) BOSTON, Jan 17 (Reuters) – U.S. Treasury yields rose on Friday after strong homebuilding and manufacturing reports and upbeat corporate earnings, while traders eyed the potential impact of a new government bond coming by summer. The benchmark 10-year yield was up 2.5 basis points in afternoon trading at 1.8337%. U.S. homebuilding surged to a 13-year high in December according to federal data released Friday morning, suggesting the housing market recovery was back on track amid low mortgage rates and could help support the longest economic expansion on record. The report helped drive the 10-year yield as high as 1.849% at one point in Friday’s session. Analysts have cautioned that bond market investors don’t seem ready to drive the note past the 2% level even as equity markets hit new highs. “It doesn’t seem to have gleaned most of the optimism we’ve seen in the equity market,” said John Herrmann, director of U.S. interest rates strategy for MUFG. Equity investors seem willing to find company-specific reasons to look past soft growth and inflation figures, he said. “The bond market is telling you that growth is a little more moderate” than stock prices suggest, he said. Tom Simons, money market economist for Jefferies, said longer-term yields also may have gotten a boost because of Thursday’s announcement by the U.S. Treasury that it will begin issuing a new 20-year bond in the first half of 2020 as it seeks to plug budget deficits expected to top $1 trillion annually.

“The long end of the curve is more sensitive than it might otherwise be to positive economic news,” Simons said. The 30-year bond was up 3.6 basis points at 2.295%. Meanwhile the two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 1.5695%. U.S. manufacturing output rose unexpectedly in December as a drop in motor vehicle output was outpaced by increases in production of other durable goods, food and beverages, and other products. U.S. stock indexes were at record highs on Friday. Shares were driven by optimism over corporate earnings, upbeat economic data and indications of resilience in China’s economy.

January 17 Friday 2:54PM New York / 1954 GMT

Price Current NetYield % Change

(bps)

Three-month bills 1.53 1.5612 0.002Six-month bills 1.5275 1.5647 0.003Two-year note 100-27/256 1.5695 0.002Three-year note 99-196/256 1.5807 0.003Five-year note 100-144/256 1.631 0.006Seven-year note 100-8/256 1.7451 0.01210-year note 99-64/256 1.8337 0.02530-year bond 101-184/256 2.295 0.036

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 7.50 0.75

spread

U.S. 3-year dollar swap 4.25 0.75

spread

U.S. 5-year dollar swap 1.25 0.75

spread

U.S. 10-year dollar swap -4.50 0.25

spread

U.S. 30-year dollar swap -31.75 -0.75

spread

(Editing by Nick Zieminski)



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