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TREASURIES-Yields rise as investors wait on French election
April 19, 2017 / 7:26 PM / 8 months ago

TREASURIES-Yields rise as investors wait on French election

 (Adds quotes, Fed's Rosengren, Fed economic report, updates
prices)
    * Traders wait on new catalyst for direction
    * Fed's Rosengren says Fed should pare bond holdings

    By Karen Brettell
    NEW YORK, April 19 (Reuters) - U.S. Treasury yields rose on
Wednesday as traders waited on a new catalyst for direction,
after a rally on Tuesday sent yields to five-month lows prompted
by concerns about the French election and rising geopolitical
tensions.
    “We’re consolidating and looking for the next big trade,
whether it is a reversal of the rally or an extension of it,”
said Ian Lyngen, head of U.S. rates strategy at BMO Capital
Markets in New York.
    Benchmark 10-year notes             dropped 8/32 in price to
yield 2.21 percent. The 10-year yield fell as low as 2.165
percent on Tuesday and has tumbled from a recent high of 2.63
percent hit on March 14.
    “Today is a little bit of a giveback, things are settling
down a little bit given the overbought nature of the market,”
said Dan Mulholland, head of Treasuries trading at Credit
Agricole in New York. “Ten-year notes got down to 2.16
(percent), which is well below where anyone thought we’d get
given the backdrop of the economy.”
    With no major economic releases due this week investors were
focused on the French elections, U.S. tensions with North Korea
and any new indications on when the Trump administration is
likely to undertake tax and fiscal reforms.
    Centrist Emmanuel Macron held on to his lead as favorite to
win France's presidential election, a closely watched poll
showed, although it indicated that the first round of voting at
the weekend remained too close to call.             
    U.S. Vice President Mike Pence said that Washington would
work with its allies and China to put economic and diplomatic
pressure on North Korea but added that the United States would
defeat any attack with an "overwhelming response."             
    Bonds prices have been boosted in recent weeks by reduced
expectations that the Federal Reserve will raise interest rates
two more times this year following disappointing economic data
releases. The administration of U.S. President Donald Trump is
also seen as less likely to pass fiscal or tax reforms in the
near term.
    Boston Fed President Eric Rosengren said the Fed should
begin shedding its bond holdings soon but do so in a very
gradual way that has little effect on its planned interest rate
hikes.             
    The U.S. economy expanded at a modest-to-moderate pace
between mid-February and the end of March, but inflation
pressures remained in check, the Federal Reserve said on
Wednesday.             

 (Editing by Andrea Ricci)
  
 
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