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TREASURIES-Yields fall from highs after weak NY manufacturing data
May 15, 2017 / 1:15 PM / 7 months ago

TREASURIES-Yields fall from highs after weak NY manufacturing data

    * New York state manufacturing survey turns negative
    * Traders reduce odds for June rate hike
    * North Korea worries spark overnight safety buying

    By Karen Brettell
    NEW YORK, May 15 (Reuters) - U.S. Treasury yields fell from
session highs on Monday after a New York state manufacturing
survey turned negative for the first time since October, adding
to a recent string of weakening data.
    The Empire State manufacturing survey fell to a reading of
minus 1 in April, compared with a gain of 5.2 in April.
    It came after weaker-than-expected U.S. consumer inflation
data for April on Friday diminished the view that the Federal
Reserve would raise interest rates more than once for the rest
of the year.
    “We’re being aided by the weaker empire number,” said Justin
Lederer, an interest rate strategist at Cantor Fitzgerald in New
York. “Things have softened in the last few weeks.”
    The Consumer Price Index grew 2.2 percent on a 12-month
basis through April, slower than March's 2.4 percent gain. This
raised concerns the core rate of personal consumption
expenditure would take longer than previously thought for
inflation to reach the Fed's 2-percent goal.             
    Benchmark 10-year notes             were last down 2/32 in
price to yield 2.34 percent, down from 2.35 percent before the
data was released.
    The yields fell to 2.32 percent overnight, aided by safety
buying after North Korea fired a ballistic missile that landed
in the sea near Russia on Sunday.             
    Futures traders have reduced expectations that the Fed will
raise rates in June, though a rate increase that month is still
viewed as likely.
    Futures traders are pricing in a 69 percent chance of a June
hike, down from 83 percent a week ago, according to the CME
Group’s FedWatch Tool.
    The traders see only a 45 percent chance that two or more
rate increases will be made by the Fed’s December meeting,
however, despite Fed officials repeating that they view two
additional rate increases this year as likely.

 (Editing by Frances Kerry)

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