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TREASURIES-Yields rise with re-set of bearish bond bets
June 3, 2014 / 7:18 PM / 3 years ago

TREASURIES-Yields rise with re-set of bearish bond bets

(Updates prices)
    * Yields rise to three-week highs
    * Corporate supply, short resetting weighs on Treasuries
    * Weaker German bunds adds to U.S. bond weakness

    By Karen Brettell
    NEW YORK, June 3 (Reuters) - U.S. Treasuries yields rose to
their highest in three weeks on Tuesday as investors reset bets
that yields are likely to climb after they fell to 11-month lows
last week.
    Yields have risen this week after month-end buying from last
week dissipated.
    Investors have also covered bets that yields would rise in
recent weeks, which helped to push them lower. But traders said
those bets were being reset, which is put pressure on the bonds
and sent yields higher again.
    "I think the short base is building again," said Tom Tucci,
head of Treasuries trading at CIBC in New York.
    The difference between the number of investors who said they
are bearish on U.S. long-dated Treasuries and those who are
bullish grew to its biggest in eight years, according to a J.P.
Morgan survey released on Tuesday. 
    U.S. bond yields also rose with German bund yields on
Tuesday after euro zone inflation data was in line with revised
expectations, prompting some in the market who had expected an
even weaker number to book profits after a recent rally.
 
    Traders are preparing for a busy second half of the week,
with the European Central Bank expected to cut interest rates
and announce other measures to stimulate growth in the region
when it meets on Thursday.
    At the same time, strong corporate debt issuance is reducing
demand for Treasuries.
    "Yesterday there was a large amount of corporate issuance
that will continue into the end of the week. That is weighing on
prices, and the European market is staying offered rather than
bid into the ECB," Tucci said.
    Benchmark 10-year notes were last down 18/32 in
price to yield 2.59 percent, the highest since May 14.
Thirty-year bonds fell 1-06/32 in price to yield
3.43 percent, the highest in a week.
    The U.S. jobs report for May is also due on Friday and is
expected to show that employers added 218,000 people to
payrolls, according to the median estimate of 105 economists
polled by Reuters. 
    "The past three months have seen Treasury yields move higher
into payrolls and this week is shaping up the same way," said
Richard Gilhooly, an interest rate strategist at TD Securities
in New York.
    The Federal Reserve bought $1.87 billion in notes due in
2020 and 2021 on Tuesday as part of its ongoing purchase
program.

 (Reporting by Karen Brettell; Editing by James Dalgleish, Dan
Grebler and Nick Zieminski)

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