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TREASURIES-Prices drop after French election soothes Europe fears
April 24, 2017 / 8:00 PM / 8 months ago

TREASURIES-Prices drop after French election soothes Europe fears

    * U.S. bond yields hit 2-week highs
    * Bond prices retrace some losses in afternoon session

 (Adds comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 24 (Reuters) - U.S. Treasury debt prices
fell on Monday after centrist Emmanuel Macron's victory in the
first round of France's presidential race bolstered expectations
the country would stay in the European Union and preserve the
euro.
    That fueled a selloff of safe-haven assets such as
Treasuries. Overall Treasuries yields, which move inversely to
prices, rose to two-week highs following Macron's win. 
    In afternoon trading, however, bond prices recouped some of
their losses due to short-covering and dip-buying especially
from European investors who value the nice pick-up in yield on
long-dated U.S. government debt.
     The French election result, meanwhile, was viewed as
positive for Europe, reducing the risk of an anti-establishment
scare similar in scale to that of Britain's vote to quit the EU
and the election of Donald Trump as U.S. president in November.
    Ahead of Sunday's election, Treasury prices had rallied as
investors sought protection against a potentially destabilizing
outcome.
    "We saw a strong risk-on sell-off in Treasuries as there was
no real surprise in the French election," said Kim Rupert,
managing director of global fixed income at Action Economics in
San Francisco.
    In late trading, U.S. 10-year notes             were down
11/32 in price to yield 2.276 percent, from 2.236 percent on
Friday. Yields hit a two-week peak of 2.325 percent earlier in
the aftermath of the French election outcome. 
    The 10-year yield briefly dipped to 2.165 percent last week,
 the lowest since Nov. 10. The notes had struggled to hold below
strong technical resistance at yields of around 2.19 percent.
    U.S. 30-year bond prices were down 23/32, yielding 2.930
percent US30-YT=RR, up from Friday's 2.894 percent.
Thirty-year yields earlier touched a two-week peak of 2.964
percent.
    On the front-end, U.S. two-year yields were also up at 1.233
percent           , from 1.184 percent last Friday.
    Treasury supply is also in focus this week, with the auction
of $88 billion in two-year, five-year and seven-year notes.
    Investors are also awaiting Trump's tax plan on Wednesday.
Last week, Trump promised a "big announcement" on overhauling
the U.S. tax code, a top campaign pledge. An administration
official said over the weekend the announcement will consist of
"broad principles and priorities."             
    "The fact that the Trump administration is working on tax
reform sooner than they thought, especially after the healthcare
defeat, might keep stocks buoyant and Treasuries a bit on the
defensive," said Action Economics' Rupert.
    "But then again, investors like the yield on the 10s and 30s
so they may not sell off too hard."

 (Editing by Bernadette Baum and Chris Reese)
  
 
 

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