December 22, 2016 / 2:13 PM / 7 months ago

TREASURIES-Yields rise on stronger data, before supply

3 Min Read

* US GDP, capital goods orders improve
    * Treasury to sell 2,5,7-yr supply next week

    By Karen Brettell
    NEW YORK, Dec 22 (Reuters) - U.S. Treasury yields rose on
Thursday after data showed improving economic growth, and as
investors prepared for new Treasury supply next week.
    Data showed that the U.S. economy grew faster than initially
thought in the third quarter, notching its best performance in
two years, amid solid consumer spending and a jump in soybean
exports.
    Gross domestic product increased at a 3.5 percent annual
rate instead of the previously reported 3.2 percent pace, the
Commerce Department said in its third GDP estimate on Thursday.
 
    New orders for U.S.-made capital goods also rose more than
expected in November amid strong demand for machinery and
primary metals, suggesting some of the oil-related drag on
manufacturing was starting to fade.
    The Commerce Department said on Thursday that non-defense
capital goods orders excluding aircraft, a closely watched proxy
for business spending plans, increased 0.9 percent after an
unrevised 0.2 percent gain in October. 
    "The data was stronger than people expected," said Tom di
Galoma, a managing director at Seaport Global Holdings in New
York.
    At the same time, investors are preparing for the sale of
new two-year, five-year and seven-year supply next week, which
will be sold when many traders are away on vacation and with
some European markets also still closed on Tuesday.
    "You're seeing a setup going into the Christmas holiday for
Treasury supply," said di Galoma. "A lot of Europe will be off
next week...I think that's going to present a little bit of a
problem for supply."
    Benchmark 10-year notes were last down 8/32 in
price to yield 2.57 percent, up from 2.54 percent late
Wednesday.
    Some investors are also wary of buying bonds as they
evaluate how many times the Federal Reserve is likely to raise
interest rates next year.
    The Fed was more hawkish than expected at its December
meeting last week, indicating that it may raise rates three
times next year.
    That helped to send 10-year note yields to a more than
two-year peak and two-year note yields to their highest levels
since 2009.
    Yields have soared since Donald Trump's victory in the U.S.
presidential election last month, as investors bet that he would
implement new fiscal stimulus that would boost growth and
inflation.

 (Editing by Frances Kerry)

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