* Strong U.S. economic data boosts Treasury yields
* Positive data from China, Europe helps global yields
* 'Rate-locking' activities also weigh on Treasury prices
(Recasts, updates prices, adds comment, table, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 3 U.S. Treasury debt yields rose
on Tuesday after three days of losses, bolstered by positive
U.S. data and upbeat economic reports from China and Germany.
It was a day of risk-taking in the market in the first
trading session of the year, as investors bought stocks and oil
and sold sovereign bonds such as U.S. Treasuries and German
"Global yields in general are higher as data overall has
been relatively positive," said Gennadiy Goldberg, interest
rates strategist, at TD Securities in New York.
"Also we really rallied into the year end, which may have
been some last-minute buying. But there are more people back
now, so the market is getting back into place," he added.
Tuesday's U.S. data showed factory activity accelerated to a
two-year high in December amid a surge in new orders and
employment. Other figures showed construction spending hit a
10-1/2-year high in November.
Chinese data indicating the fastest factory output growth in
six years in the world's second-largest economy along with
firmer German and French inflation figures provided a broad
boost to global yields.
TD's Goldberg said Treasury debt prices also fell as Wall
Street dealers looked to lock in borrowing costs for corporate
bonds they are underwriting in what is known as rate-locking.
January is historically a month with a heavy corporate issuance
As part of underwriting, a dealer sells Treasuries as a
hedge to lock in the borrowing cost on the bond issue before the
deal is completed. Once the bond is sold, the dealer buys back
Treasuries to exit the rate lock.
Typically, market moves stemming from supply hedging are
temporary and not indicative of market sentiment.
In late morning trading, the U.S. 10-year note
was down 14/32 in price to yield 2.484 percent, compared with
2.432 percent late on Friday.
U.S. 30-year bond prices dropped 18/32, yielding 3.082
percent, up from Friday's 3.051 percent.
U.S. two-year note prices were down 2/32, with a yield of
1.242 percent, compared with 1.198 percent on Friday.
U.S. Treasuries were the worst performing fixed-income asset
in 2016, far underperforming both U.S. investment grade and
high-yield corporate bonds as well as federally backed mortgage
Treasuries posted a loss of 3.967 percent in the fourth
quarter, their poorest performance in the history of the Merrill
Lynch Treasury index. A comparable measure from Bloomberg
Barclays indexes showed Treasuries had their worst showing since
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Dion Rabouin; Editing by Chizu Nomiyama and Meredith Mazzilli)