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TREASURIES-Yields rise as investors wait on further clarity on Fed
May 15, 2017 / 7:00 PM / 6 months ago

TREASURIES-Yields rise as investors wait on further clarity on Fed

 (Recasts with price change, adds quotes, updates prices)
    * 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 drifted
higher on Monday as investors evaluated how many times the
Federal Reserve was likely to raise rates this year, with no
large economic releases due this week to sway opinion.
    Yields briefly fell earlier 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.
            
    Weaker-than-expected U.S. consumer inflation data for April
on Friday diminished the view that the Fed would raise interest
rates more than once for the rest of the year.
    Benchmark 10-year U.S. bond yields have largely held in a
range between around 2.20 percent and 2.40 percent since March
22 as investors wait on further clarity on whether the Trump
administration is likely to pass tax and fiscal overhauls this
year.
    The measures are expected to boost economic growth, making
further interest rate increases more likely. 
    "There are so many unknowns for us to really move in either
direction," said Charles Comiskey, head of Treasuries trading at
Bank of Nova Scotia in New York. "We are in a tight range until
something occurs."
    The 10-year notes             fell 3/32 in price to yield
2.34 percent, up from 2.33 percent late on Friday.
    The yields fell to 2.32 percent overnight, the lowest since
May 3, on safety buying after North Korea fired a ballistic
missile that landed in the sea near Russia on Sunday.
            
    Housing starts and industrial production data will be in
focus on Tuesday.
    Investors will also watch to see how much demand there is
for a $11 billion reopening of 10-year Treasury
Inflation-Protected Securities (TIPS) on Thursday, in light of
the weaker inflation data.
    "TIPS have been under pressure," said Justin Lederer, an
interest rate strategist at Cantor Fitzgerald in New York.
    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 49 percent chance that two or more
rate increases will be made by year-end.

 (Editing by Frances Kerry and Andrew Hay)
  
 
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