December 22, 2016 / 7:44 PM / 8 months ago

TREASURIES-Yields rise on stronger data, before supply

(Adds consumer spending data, auction details, updates prices)
    * US GDP, capital goods orders improve
    * Treasury to sell $88 bln supply next week

    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. 
    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 data was stronger than people expected," said Tom di
Galoma, a managing director at Seaport Global Holdings in New
York.
    Prices pared losses, however, after additional data showed
that U.S. consumer spending increased modestly in November as
household incomes failed to rise for the first time in nine
months, suggesting economic growth slowed in the fourth quarter.
    Benchmark 10-year notes were last down 3/32 in
price to yield 2.55 percent, after earlier rising as high as
2.58 percent, up from 2.54 percent late Wednesday.
    Investors are also preparing for the sale of $88 billion in
new coupon-bearing 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."
    The sales will comprise $26 billion in two-year notes on
Tuesday, $34 billion in five-year notes on Wednesday and $28
billion in seven-year notes on Thursday.
    The Treasury sold $14 billion in Treasury
Inflation-Protected Securities (TIPS) on Thursday at a high
yield of 0.120 percent. 
    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; Editing by Chizu Nomiyama)

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