June 15, 2017 / 3:36 PM / 2 months ago

TREASURIES-Yields inch up from depressed levels on U.S. data, Fed aftermath

    * U.S. jobless claims, Philly Fed stronger-than-expected
    * Most yields remain near depressed levels after Wednesday
plunge
    * Two-year yields hit highest in three months

    By Sam Forgione
    NEW YORK, June 15 (Reuters) - U.S. Treasury yields edged
higher on Thursday after some stronger-than-expected U.S.
economic data, with two-year yields touching their highest in
three months, although most yields remained depressed after
their biggest plunge in a month Wednesday.
    Initial claims for state unemployment benefits dropped 8,000
to a seasonally adjusted 237,000 for the week ended June 10, the
Labor Department said on Thursday. Economists had forecast
first-time applications for jobless benefits falling to 242,000
in the latest week.
    In addition, June readings of the New York Fed's Empire
State business conditions index and the Philadelphia Fed
business conditions index both beat economists' expectations.

    U.S. two-year yields hit 1.368 percent, the
highest since mid-March, in the wake of the Federal Reserve's
second interest rate increase of the year on Wednesday and the
U.S. economic data. 
    Three-year yields briefly jumped above 1.5
percent after hitting an eight-day low of 1.417 percent
Wednesday. Short-dated yields are most sensitive to Fed rate
movements.
    While yields on Treasuries maturing between five and 30
years inched up, they were not far from their lowest levels
since November touched Wednesday after government data on
inflation and retail sales for May fell well short of market
expectations.
    Analysts said traders continued to doubt the Fed would be
able to raise interest rates for a third time this year, as the
central bank projected Wednesday, given soft inflation readings.
    "We are still pretty much making baby steps after
yesterday’s rally," said Stanley Sun, interest rate strategist
at Nomura Securities International in New York. "There is
definitely a little bit of the market being skeptical of how far
the Fed can raise rates this year and also beyond."
    Benchmark 10-year Treasuries were last down 4/32
in price to yield 2.153 percent, from a yield of 2.138 percent
late Wednesday. Benchmark yields hit 2.103 percent Wednesday,
their lowest since Nov. 10. 
    "There is still a lot of uncertainty" about U.S. growth,
said Kim Rupert, managing director for fixed income at Action
Economics in San Francisco. 
    Other data showing import prices recorded their biggest drop
in 15 months in May suggested domestic inflation measures could
remain soft for a while.
    That low inflation outlook helped keep long-dated yields
anchored, Rupert said. She said most yields were still pressured
a bit higher partly in response to a rise in European debt
yields after a hawkish Bank of England vote.
    
    June 15 Thursday 11:16AM New York / 1516 GMT
                               Price                  
 US T BONDS SEP7               155-17/32    -0-3/32   
 10YR TNotes SEP7              126-184/256  -0-52/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.9975       1.0139    0.003
 Six-month bills               1.1025       1.124     0.005
 Two-year note                 99-204/256   1.3555    0.012
 Three-year note               100-8/256    1.4893    0.016
 Five-year note                99-252/256   1.7532    0.028
 Seven-year note               100-40/256   1.9758    0.024
 10-year note                  101-240/256  2.1568    0.019
 30-year bond                  104-108/256  2.7812    -0.002
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.00         0.50    
 spread                                               
 U.S. 3-year dollar swap        17.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         8.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -1.75         0.50    
 spread                                               
 U.S. 30-year dollar swap      -36.00         1.25    
 spread                                               
 
 (Reporting by Sam Forgione; Editing by Chris Reese)
  

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