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TREASURIES-Yields jump on global central bank policy, oil price rise
July 6, 2017 / 7:04 PM / 5 months ago

TREASURIES-Yields jump on global central bank policy, oil price rise

    * Traders grapple with hawkish central bank shift
    * Oil price rise signals inflationary pressure
    * 10-year yields hit nearly 8-week high
    * 2-yr yields hit more than 8-year high in early trading

 (Updates prices, adds comment)
    By Sam Forgione
    NEW YORK, July 6 (Reuters) - U.S. Treasury yields rose on
Thursday, with benchmark yields touching nearly eight-week
highs, on the prospect of hawkish global central bank policy and
concern that rising oil prices could spur inflationary
    Analysts said traders were still grappling with hawkish
comments from the heads of the European Central Bank and Bank of
England last week, which would be negative for safe-haven
government bonds. 
    Those concerns, along with the rising oil prices and traders
anticipating that the Fed will begin unwinding its bond holdings
later this year, led traders to sell Treasuries even as U.S.
June private payrolls data disappointed expectations.

    "All central banks seem to be more ready to row in the same
direction at this point, towards tighter monetary policy," said
Ellis Phifer, market strategist at Raymond James in Memphis,
    Longer-dated yields were last rising the most, with 30-year
yields up about five basis points from Wednesday's closing level
and set to post their biggest one-day rise in more than two
months. Those yields hit a six-week high of 2.923 percent
    Benchmark 10-year yields touched a nearly eight-week high of
2.391 percent before easing from that peak to last
stand at 2.373 percent. 
    While shorter-dated yields were not up as much as long-dated
yields, they still hit peaks in early trading with two-year
yields hitting a more than eight-year high of 1.435
percent and three-year yields touching a roughly
3-1/2-month high of 1.617 percent. 
    Minutes from the Fed's June meeting on Wednesday showed that
several officials wanted to announce a start to the process of
reducing the Fed's large portfolio of Treasury bonds and
mortgage-backed securities by the end of August but others
wanted to wait until later in the year.
    "Most people would say it's pretty clear the Fed is going to
start this whole unwinding of the balance sheet," said Stan
Shipley, fixed income strategist at Evercore ISI in New York.
"That’s not good news by itself for long-end Treasuries." 
    U.S. five-year Treasury yields hit a more than
three-month high of 1.968 percent while seven-year yields
 hit an eight-week high of 2.228 percent. 
    Analysts said rising oil prices also sent longer-dated
yields higher, although yields eased off their highs as oil
prices pared gains.
    Traders awaited the Labor Department's U.S. June nonfarm
payrolls report on Friday. Economists polled by Reuters expect
U.S. employers to have added 179,000 jobs last month, above
May's meager 138,000. 
    July 6 Thursday 2:50PM New York / 1850 GMT
 US T BONDS SEP7               152-8/32     -1-3/32   
 10YR TNotes SEP7              124-248/256  -0-64/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.0175       1.0343    -0.016
 Six-month bills               1.1225       1.1445    -0.005
 Two-year note                 99-178/256   1.4065    -0.008
 Three-year note               99-188/256   1.5927    0.009
 Five-year note                99-20/256    1.9451    0.020
 Seven-year note               98-168/256   2.2087    0.032
 10-year note                  100-8/256    2.3713    0.037
 30-year bond                  101-224/256  2.9055    0.050
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        24.75         0.50    
 U.S. 3-year dollar swap        20.25        -1.00    
 U.S. 5-year dollar swap         7.00        -0.50    
 U.S. 10-year dollar swap       -2.75        -0.50    
 U.S. 30-year dollar swap      -29.75        -1.25    
 (Reporting by Sam Forgione; Editing by Jonathan Oatis and
Cynthia Osterman)

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