* U.S. 10-year yield set to rise for five straight weeks
* Chinese producer price data reinforce inflation jitters
* U.S. consumer sentiment strongest in 23 months - U.
* Bond selling underpinned by ECB plan to cut bond purchases
(Updates market action, adds quotes)
By Richard Leong
NEW YORK, Dec 9 U.S. Treasury yields climbed on
Friday with benchmark yields on track for a fifth straight week
of increases on stronger-than-forecast data on China inflation
and U.S. consumer sentiment ahead of $56 billion in government
debt supply next week.
The rise in U.S. yields was also underpinned by ongoing bond
sales after the European Central Bank's decision on Thursday to
reduce its monthly bond purchases to 60 billion euros from the
current 80 billion euros, starting in April as it extended its
quantitative easing into the end of 2017.
"It's still accommodative but it's acknowledgement it has
reached its limits," said Michael Arone, chief investment
strategist at State Street Global Advisors in Boston.
Treasury yields retreated from their earlier peaks on
safe-haven bids for U.S. bonds following reports the ECB
rejected Monte Paschi's request for a three-week extension to
raise 5 billion euros. The cash was intended for a rescue plan
so the struggling Italian lender could avert being wound down.
The benchmark 10-year Treasury note yield was
last at 2.462 percent, up 8 basis points from Thursday and not
far from a near 1-1/2 year peak set on Dec. 1.
The 10-year yield was poised for the longest streak of
weekly increase since May-June 2013, a period known as the
"taper tantrum" after then Federal Reserve Chairman Ben Bernanke
hinted the Fed was considering shrinking its bond purchases.
Since the Nov. 8 U.S. election, investors have been dumping
bonds globally on bets of faster growth and inflation from tax
cuts, more federal spending and stricter trade policies under a
Inflation worries were reinforced after data showed China's
producer prices rose at the swiftest rate in more than five
years in November.
U.S. consumer sentiment strengthened to its strongest since
January 2015 in early December, although the outlook for
consumer inflation fell, according to the University of
Prospects of improvement in the world's two biggest
economies supported the view the Fed is on track to raise
interest rates further in 2017 after a near-certain quarter
point hike next week.
Investors may be reluctant to bid aggressively for the
upcoming Treasuries supply before the Fed's rate decision,
The Treasury Department will sell $24 billion of three-year
notes and $20 billion in 10-year notes on Monday and $12 billion
of 30-year bonds on Tuesday.
"People have to price in an uncertainty premium," said
Robert Tipp, chief investment strategist at PGIM Fixed Income in
Newark, New Jersey.
December 9 Friday 2:19PM New York / 1919 GMT
US T BONDS MAR7 148-12/32 -1-19/32
10YR TNotes MAR7 124-4/256 -0-132/2
Price Current Net
Yield % Change
Three-month bills 0.5275 0.5355 0.025
Six-month bills 0.625 0.6356 0.011
Two-year note 99-190/256 1.1329 0.025
Three-year note 98-208/256 1.4157 0.040
Five-year note 99-98/256 1.8807 0.062
Seven-year note 99-52/256 2.2492 0.069
10-year note 95-240/256 2.4638 0.075
30-year bond 94-148/256 3.1563 0.070
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 23.00 0.50
U.S. 3-year dollar swap 15.75 0.75
U.S. 5-year dollar swap 1.00 0.25
U.S. 10-year dollar swap -14.00 0.00
U.S. 30-year dollar swap -51.50 1.50
(Reporting by Richard Leong; Editing by Meredith Mazzilli and