June 29, 2017 / 6:46 PM / a year ago

TREASURIES-Yields rise as European central banks seen as less accommodative

 (Adds Bullard, CBO, quotes; Updates prices)
    * Treasury yields rise with weaker European bonds
    * Bonds pare price losses as stocks decline
    * Inflation data on Friday in focus

    By Karen Brettell
    NEW YORK, June 29 (Reuters) - Benchmark U.S. Treasury yields
rose to six-week highs on Thursday on the likelihood that
central banks in Europe will become less accommodative, before
bonds pared price losses as stocks declined.
    European Central Bank President Mario Draghi said on Tuesday
the ECB might tweak its stimulus so it does not become more
accommodative as the economy recovers. Sources on Wednesday,
however, said he had not intended to signal imminent tightening.
    Bank of England Governor Mark Carney also said on Wednesday
that a rise in British interest rates is likely to be needed as
the economy comes closer to running at full capacity.
    “What’s going on in Europe is really what’s driving us
here,” said Brian Daingerfield, a macro strategist at NatWest
Markets in Stamford, Connecticut.
    Position squaring before month-end and the end of the first
half of the year may also be behind the bond weakness, said Lou
Brien, a market strategist at DRW Trading in Chicago.
    Benchmark 10-year notes             fell 14/32 in price to
yield 2.27 percent, after earlier rising to 2.30 percent, the
highest since May 17.
    Treasuries pared price losses as stocks declined.
    The U.S. economy will take focus on Friday when personal
income and consumption data will be evaluated for inflation
    “Another weak number may be a factor in the pace of rate
hikes going forward," said Brien.
    St Louis Fed President James Bullard said on Thursday that
there is nothing left for the Fed to do on interest rates and
the natural next step for the central bank would be to start
trimming its balance sheet.              
    Data on Thursday showed the U.S. economy slowed less sharply
in the first quarter than initially estimated due to
unexpectedly higher consumer spending and a bigger jump in
    The number of Americans filing for unemployment benefits
edged up last week, but the underlying trend remained consistent
with a tight labor market, other data showed.             
    The Congressional Budget Office (CBO) on Thursday estimated
that the U.S. will have a budget deficit of $693 billion this
year, $134 billion more than its prior estimate made in January.
    The CBO also said that Congress will need to raise the debt
limit by "early to mid-October."                           

 (Editing by Nick Zieminski)
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