May 17, 2018 / 3:31 PM / in 9 months

TREASURIES-U.S. 10-year yield hovers at 7-year high before TIPS sale

    * Investors, speculators said divided over market's next
    * U.S. to sell $11 bln in older 10-year TIPS issue
    * U.S. jobless claims rise, Philly Fed data improve

 (Updates trading, adds quote)
    By Richard Leong
    NEW YORK, May 17 (Reuters) - U.S. 10-year Treasury yields
rose on Wednesday, touching a near seven-year peak in a pause of
this week's bond market selloff, as traders and investors were
divided over whether it was time to buy or if the market was
vulnerable to more selling.
    The U.S. Treasury Department is scheduled to hold a $11
billion reopening of a prior issue of 10-year Treasury Inflation
Protection Securities (TIPS) at 1:00 p.m. EDT (1700 GMT).
    Some traders said solid retail sales data in April released
earlier this week spurred speculators to pare their Treasury
holdings, but other blamed technical factors on the selloff on
moderate trading volume. 
    "It's more a technical move than one driven by
fundamentals," said Bruno Braizinha, interest rate strategist at
SG Corporate & Investment Banking in York.
    On balance, recent U.S. economic readings, including
payrolls and consumer price data in April, have fallen short of
market expectations, Braizinha noted.
    On Thursday, new applications for U.S. jobless benefits rose
more than forecast last week after hitting their lowest level
since 1969 in late April. On the other hand, Mid-Atlantic
business activity rose to its strongest level in a year, based
on an index from the Philadelphia Federal Reserve.
    At 11:10 a.m. (1510 GMT), the yield on benchmark 10-year
Treasury notes was 3.109 percent, up over 1 basis
point from late on Wednesday. It touched 3.122 percent earlier
Thursday, which was the highest since July 2011, according to
Reuters data.
    Since the 10-year yield on Tuesday broke above 3.05 percent,
which was seen as a key technical level, there was no sign yet
that asset managers were bailing from their hefty bullish bets
on longer-dated Treasuries or that speculators are exiting from
their heavy bearish bond positions, analysts said.
    Technical indicators suggested the Treasuries market is the
most oversold since three weeks ago when the 10-year yield rose
above 3 percent for the first time since January 2014.
    Ten-year Treasuries are attractive at current yield levels
and will be more compelling if their yield climbs to 3.25
percent, Braizinha said.
    The Treasuries market's risks are "symmetric," meaning
yields could move in either direction, he said. If the 10-year
yield hits 3.25 percent, "it's a definite buy." 
May 17 Thursday 11:12AM EDT/ 1512 GMT
 US T BONDS JUN8               140-17/32    -0-13/32   
 10YR TNotes JUN8              118-124/256  -0-16/256  
                               Price        Current    Net
                                            Yield %    Change
 Three-month bills             1.8775       1.9126     0.008
 Six-month bills               2.04         2.0898     0.005
 Two-year note                 99-160/256   2.5729     -0.016
 Three-year note               99-162/256   2.7537     -0.005
 Five-year note                99-38/256    2.9359     0.002
 Seven-year note               98-208/256   3.0658     0.008
 10-year note                  98           3.1094     0.014
 30-year bond                  97-204/256   3.2404     0.025
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
 U.S. 2-year dollar swap        24.25         1.25     
 U.S. 3-year dollar swap        18.00         0.75     
 U.S. 5-year dollar swap         9.75         0.50     
 U.S. 10-year dollar swap        3.00        -0.25     
 U.S. 30-year dollar swap       -8.25        -0.75     

 (Reporting by Richard Leong; Editing by Bernadette Baum)
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