January 13, 2017 / 7:34 PM / 9 months ago

TREASURIES-U.S. yields rise on steady data, stock gains

* Treasury yields abruptly rise after retail sales, PPI data
    * U.S. consumer inflation view improves in early Jan - U.
Michigan
    * Overhang from soft 30-year auction seen feeding into bond
sales
    * U.S. bond market to close on Monday for holiday

 (Updates market action, adds quotes)
    By Richard Leong
    NEW YORK, Jan 13 (Reuters) - U.S. Treasury yields rose
Friday as data supporting the notion of a steady U.S. economic
expansion and a rise in Wall Street stock prices stoked selling
in low-risk government bonds.
    Friday's yield increase wiped out much of the week's fall
tied to traders scaling back bond bets on potentially higher
inflation and federal borrowing under the incoming Trump 
administration and a Republican-controlled Congress.
    Some investors were disappointed Trump did not disclose
details at his Wednesday news conference on his plans for tax
cuts, looser regulations and infrastructure spending, which
sparked a massive bond market selloff around the world following
his presidential win on Nov. 8.
    They now hope for more clues from top Republican lawmakers
on possible measures to boost the economy.
    "There is not a whole lot of conviction in rates until we
hear more from Congress about what they are shooting for in
terms of policies," said Gennadiy Goldberg, interest rates
strategist with TD Securities in New York.  
    Friday's abrupt jump in yields from their initial lows came
soon after U.S. data on retail sales and producer prices in
December, which was largely within analyst forecasts.
  
    Analysts and traders blamed the market turnaround on
computerized sell orders generated in response to buying when
the data were released, pushing bonds to technical levels that
triggered sell orders.
    The rise in yields also stemmed from traders locking in
recent gains ahead of the three-day U.S. Martin Luther King Jr.
weekend and bond dealers reselling their purchases from a soft
$12 billion 30-year Treasury auction on Thursday.  
    "The market is flushing lower because there are a lot of bad
longs out there," said Tom di Galoma, managing director at
Seaport Global Holdings in New York. 
    The benchmark 10-year Treasury yield was up over
3  basis points at 2.396 percent after it fell to 2.307 percent
which was its lowest in six weeks.
    The 10-year yield was on track for a fourth straight week of
decline which had not happened since late May to early July last
year when it fell for seven consecutive weeks, Reuters data
showed.
    University of Michigan data showed U.S. consumer inflation
outlook improved in early January, underpinning Friday's rise in
yields. 
    Treasury yields retreated as U.S. stock prices pared their
earlier gains and DBRS downgraded Italy's bond rating,
rekindling some safe-haven bids for bonds. 
    The S&P 500 and Nasdaq moved higher, while
the Dow was slightly lower. 
    
  Friday, Jan. 13 at 1359 EST (1859 GMT):
                               Price                   
 US T BONDS MAR7               151-30/32    -0-21/32   
 10YR TNotes MAR7              124-160/256  -0-68/256  
                               Price        Current    Net
                                            Yield      Change
                                            (pct)      (bps)
 Three-month bills             0.515        0.5228     0.005
 Six-month bills               0.5975       0.6076     0.013
 Two-year note                 100-24/256   1.2012     0.020
 Three-year note               99-174/256   1.4847     0.030
 Five-year note                100-120/256  1.9003     0.032
 Seven-year note               100-72/256   2.2061     0.036
 10-year note                  96-136/256   2.3982     0.037
 30-year bond                  97-176/256   2.9926     0.033
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        29.25         0.25     
 spread                                                
 U.S. 3-year dollar swap        21.00         0.50     
 spread                                                
 U.S. 5-year dollar swap         5.00         0.75     
 spread                                                
 U.S. 10-year dollar swap      -12.00         0.75     
 spread                                                
 U.S. 30-year dollar swap      -47.25         1.00     
 spread                                                
    

 (Reporting by Richard Leong; Editing by Bernadette Baum and
Andrew Hay)

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