July 5, 2017 / 8:17 PM / 2 months ago

TREASURIES-Yields dip but still near recent peaks after Fed minutes

    * Yields edge lower after weak U.S. factory orders data
    * Fed minutes ultimately viewed as non-event
    * Benchmark 10-year yields touch more than 7-week high
    * Other yields remain near recent peaks

 (Recasts throughout, updates prices, adds comments)
    By Sam Forgione
    NEW YORK, July 5 (Reuters) - U.S. Treasury yields edged
lower on Wednesday as traders remained concerned about weak U.S.
factory orders data, reversing a jump on Federal Reserve meeting
minutes, while holding near recent peaks on views that global
central bank policy was turning more hawkish. 
    Yields edged lower on the day compared with Monday's closing
levels, with analysts attributing the move to Commerce
Department data showing factory goods orders dropped 0.8 percent
in May. Economists had forecast factory orders falling 0.5
percent.
    Yields were near the upper end of recent ranges, however,
with benchmark 10-year yields last at 2.332 percent
after touching a more than seven-week high of 2.357 percent in
morning U.S. trading. 
    Analysts said yields remained at elevated levels on a
historical basis given a growing chorus of hawkish comments from
global central banks, including those from the heads of the
European Central Bank and Bank of England last week. 
    In afternoon trading, yields jumped and almost touched their
recent peaks after the release of minutes of the Fed's last
policy meeting on June 13-14. But they reversed course to stand
roughly unchanged from their prior levels as analysts said the
messaging in the minutes did not reveal any major changes in the
Fed's thinking. 
    "Factory orders did send yields lower, and then obviously we
sold off initially on the minutes, and then we came back," said
Stanley Sun, interest rate strategist at Nomura Securities
International in New York. "By and large these minutes were
still relatively neutral."
    Three-year yields hit a roughly 3-1/2-month high
of 1.598 percent before the release of the factory orders data.
U.S. two-year yields were at 1.414 percent, near
Monday's more than eight-year peak of 1.426 percent. 
    Fed policymakers were increasingly split on the outlook for
inflation and how it might affect the future pace of interest
rate rises, the minutes showed.
    Analysts said Friday's U.S. non-farm payrolls report could
show a jump in jobs growth for the month of June, which would
pressure yields higher.
    Economists polled by Reuters expect the report to show U.S.
employers added 179,000 jobs last month, compared with just
138,000 in May. 
    "Yields are holding in the upper end of the range as traders
don’t expect any surprisingly weak data, about the only thing
that is going to change sentiment in July," said Jim Vogel, an
interest rate strategist at FTN Financial in Memphis, Tennessee.
    July 5 Wednesday 4:01PM New York / 2001 GMT
                               Price                  
 US T BONDS SEP7               153-9/32     0-7/32    
 10YR TNotes SEP7              125-64/256   0-36/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.0275       1.0445    -0.015
 Six-month bills               1.1275       1.1497    -0.002
 Two-year note                 99-174/256   1.4143    -0.004
 Three-year note               99-194/256   1.5845    0.000
 Five-year note                99-48/256    1.9217    -0.008
 Seven-year note               98-224/256   2.1745    -0.014
 10-year note                  100-96/256   2.332     -0.014
 30-year bond                  102-232/256  2.8546    -0.007
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        23.75       ******    
 spread                                               
 U.S. 3-year dollar swap        20.50       ******    
 spread                                               
 U.S. 5-year dollar swap         7.50       ******    
 spread                                               
 U.S. 10-year dollar swap       -2.00       ******    
 spread                                               
 U.S. 30-year dollar swap      -28.50       ******    
 spread                                               
 
 (Reporting by Sam Forgione; Editing by David Gregorio and Dan
Grebler)
  

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