February 16, 2018 / 3:33 PM / a month ago

TREASURIES-Prices rise after selloff, in line with foreign bonds

 (Recasts, adds analyst comment, table, byline, updates prices
in text)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Feb 16 (Reuters) - U.S. Treasury prices rose on
Friday, as investors bought back bonds after a selloff earlier
in the week spurred by robust U.S. inflation data that raised
the possibility the Federal Reserve may hike interest rates at a
faster pace than expected.
    U.S. benchmark 10-year yields, which move inversely to
prices, had jumped to four-year highs this week, while 2-year
notes touched more than nine-year peaks.
    Yields briefly ticked higher after data showed
stronger-than-expected housing starts and import prices,
suggesting inflation was on the rise and the economy on a stable
growth path. But there was not enough support for the price
    "The bond market was oversold from Wednesday's CPI-related
selling and that may be nearing an end soon," said Tom di
Galoma, managing director at Seaport Global in New York.
    Wednesday's data showed that the core consumer price index
grew 0.3 percent, the biggest increase since January 2017,
compared with 0.2 percent in December.
    That was followed by stronger-than-expected U.S. producer
prices data. Both reports led to a spike in yields.
    Treasury yields on Friday were also tracking a decline in
government bonds overseas, analysts said. German and
UK bonds were down on Friday, including Japanese
government bonds.
    Analysts attributed the drop in JGBS to news that Bank of
Japan Governor Haruhito Kuroda had been re-appointed for another
term. Masazumi Wakatabe, an advocate of aggressive easing, was
appointed BoJ deputy governor.
    Their appointments suggest there could a few more years of
monetary stimulus, analysts said.
    In morning trading, U.S. benchmark 10-year Treasury note
yields fell to 2.8622 percent, from Thursday's 2.893
    "The 10-year found interest at 2.90 percent," said Lou
Brien, market strategist at DRW Trading in Chicago.
    U.S. 30-year yields dropped to 3.1152 percent,
from 3.145 percent late on Thursday.
    Yields initially rose after data showed U.S. housing starts
jumped 9.7 percent to a seasonally adjusted annual rate of 1.326
million units, the highest level since October 2016. That
followed an upwardly revised sales pace of 1.209 million units.
 But the rise in yields was shortlived.
    Meanwhile U.S. import prices climbed more than expected,
rising 1.0 percent in January, boosting the outlook for
inflation in the coming months.
      February 16 Friday 10:10AM New York / 1510 GMT
 US T BONDS MAR8               144-19/32    0-19/32   
 10YR TNotes MAR8              120-168/256  0-52/256  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.57         1.5978    0.000
 Six-month bills               1.79         1.831     0.010
 Two-year note                 99-162/256   2.1936    0.010
 Three-year note               99-154/256   2.389     -0.010
 Five-year note                98-220/256   2.6223    -0.015
 Seven-year note               98-36/256    2.7963    -0.025
 10-year note                  99           2.8658    -0.027
 30-year bond                  97-196/256   3.1152    -0.030
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        27.00        -1.25    
 U.S. 3-year dollar swap        20.75         0.50    
 U.S. 5-year dollar swap         9.75         0.00    
 U.S. 10-year dollar swap        1.50         0.50    
 U.S. 30-year dollar swap      -16.00         0.50    
 (Editing by Bernadette Baum)
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