April 20, 2017 / 7:03 PM / 8 months ago

TREASURIES-Yields rise as stocks gain before French election

 (Adds auction results; updates prices)
    * 10-year note yields hit resistance at 2.19 pct
    * French election, North Korea tensions in focus
    * Rising stocks reduce demand for bonds
    * Strong demand for $16 bln 5-year TIPS auction

    By Karen Brettell
    NEW YORK, April 20 (Reuters) - U.S. Treasury yields rose on
Thursday as investors waited on the results from the French
presidential election this weekend and as rising risk appetite
boosted stocks, after yields fell earlier and broke below key
technical resistance.
    With no major economic data releases this week investors
were focused on the first round of the French election, to be
held on Sunday, U.S. tensions with North Korea and any new
indications on when the Trump administration is likely to
undertake tax and fiscal reforms.
    Benchmark 10-year notes have struggled to stay below
technical resistance at around 2.19 percent, which was tested in
overnight trading, after yields fell more than 40 basis points
in a month.
    “The 2.19 percent level represents about 50 percent of the
post-election selloff, which is why it’s such a significant
resistance level,” said Thomas Simons, a money market economist
at Jefferies in New York.
     The 10-year note             fell 12/32 in price to yield
2.25 percent. The yield briefly fell as low as 2.165 percent on
Tuesday, the lowest level since Nov. 10, and it has tumbled from
2.63 percent on March 14.
    “We’ve come a long way very, very fast so gains up here are
going to be more difficult to get or sustain,” said Mary Ann
Hurley, vice president in fixed income trading at D.A. Davidson
in Seattle.
    Bonds extended price losses as rising stocks reduced demand
for safe-haven debt.             
    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.
    The administration of U.S. President Donald Trump is also
seen as less likely to pass fiscal or tax reforms in the near
term, which had been expected to boost growth. 
    “Over the last month, the viability of the Trump economic
agenda is definitely in question,” Simons said.
    The Trump administration will unveil a tax reform plan very
soon and expects it will be approved by Congress this year
whether a healthcare overhaul happens or not, Treasury Secretary
Steven Mnuchin said on Thursday.            
    Dallas Federal Reserve President Robert Kaplan said on
Thursday that two more interest rate hikes this year remain
possible, but that the U.S. central bank has the flexibility to
wait and see how the economy unfolds.             
    The Treasury Department sold $16 billion in five-year
Treasury inflation-protected securities to strong demand, with
dealers taking their smallest ever share of the sale.
    The U.S. government will sell $88 billion in two-year,
five-year and seven-year notes next week. 

 (Editing by Leslie Adler)

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