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TREASURIES-Benchmark yields hit more than 2-week high ahead of Fed speakers
March 3, 2017 / 4:22 PM / 7 months ago

TREASURIES-Benchmark yields hit more than 2-week high ahead of Fed speakers

(Adds data, analyst quotes; updates prices)

By Dion Rabouin

NEW YORK, March 3 (Reuters) - Benchmark U.S. 10-year Treasury yields hit their highest level in more than two weeks on Friday as investors sold bonds after strong U.S. economic data and ahead of a slate of speakers from the Federal Reserve.

Selling picked up marginally after the Institute for Supply Management’s non-manufacturing purchasing managers’ index hit its highest level since October 2015, and comments from regional Fed presidents Charles Evans and Jeffrey Lacker that suggested a March rate hike was being strongly considered.

Three more members of the U.S. central bank will give public remarks during the day, including Fed Chair Janet Yellen, who will speak at the Executives’ Club of Chicago at 1 p.m. EST (1800 GMT). Investors will be looking for confirmation that the Fed plans to raise U.S. overnight interest rates at its upcoming March 14-15 meeting.

Fed funds futures prices show traders see a 75 percent chance of a rate increase this month, according to CME Group’s Fed Watch tool.

New York Fed President William Dudley and San Francisco Fed President John Williams both suggested in comments earlier this week that the Fed is poised to raise rates sooner rather than later, but Yellen is seen as the Fed’s most important voice.

Benchmark 10-year yields rose to 2.507 percent, the highest since Feb. 15. Yields on 7-year notes rose to 2.347 percent, also the highest since Feb. 15.

Yields on other maturities traded in a tight range, with the 2-year note opening lower and trading sideways after touching its highest level since August 2009 on Thursday.

That was the result of caution ahead of Yellen’s speech and the fact that investors have largely priced in a rate hike, said Karyn Cavanaugh, senior market strategist at Voya Investment Management in New York.

“The writing has been on the wall for the past couple of days,” she said.

The widespread expectation of a Fed rate hike has pushed benchmark yields up by 19 basis points so far this week, the largest one-week increase since Nov. 18, the week after the U.S. presidential election.

Market certainty that rates would rise soon has been strengthened by remarks from Dudley, who is typically seen as preferring to let inflation rise to foster reduced unemployment. He said on Tuesday that the case for tightening monetary policy soon had become “a lot more compelling.” (Reporting by Dion Rabouin; Editing by Chizu Nomiyama and Dan Grebler)

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