May 16, 2018 / 3:20 PM / 3 months ago

TREASURIES-U.S. 10-year yield hovers near 7-year peak after bond selloff

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, May 16 (Reuters) - U.S. Treasury yields were
little changed on Wednesday, with the 10-year yield hovering
near a seven-year high following a bond market selloff spurred
by signs the U.S. economy is on a stronger footing in the second
quarter.
    Disappointing growth data on Japan, together with concerns
about the financial demands of a potential Italian coalition
government from its neighbors, caused a drop in German bond
yields and stemmed another jump in U.S. yields. 
    Tuesday's sharp rise in the 10-year yield above 3.05
percent, which was seen as a key technical support level,
unnerved Wall Street as traders considered whether U.S. bonds
are gaining appeal as an alternative to riskier stocks.
    As the bond market stabilized, investors said U.S. yields
would likely hold at the higher levels until there were
meaningful changes in economic data or signs that Federal
Reserve officials are moving away from the current monetary
policy stance of a gradual pace of interest rate increases,
analysts said.
    "Cooler heads have prevailed following bets that pushed up
the 10-year yield based on more optimism about growth and
inflation," said Craig Bishop, lead strategist of the fixed
income group at RBC Wealth Management in Minneapolis.
    Data on Wednesday supported traders' view that the economy
is expanding but far from firing on all cylinders.
    U.S. industrial output grew 0.7 percent in April, while home
construction declined 3.7 percent last month, government data
showed.
    At 10:55 a.m. (1455 GMT), the 10-year Treasury yield
 was up 0.9 basis point at 3.089 percent after
touching 3.095 percent, which was the highest level since July
2011, on Tuesday, Reuters data showed. 
    The 10-year yield reversed an initial decline as Wall Street
stock prices recovered some of Tuesday's losses. It fell earlier
in step with a fall in German Bund yields.

   May 16 Wednesday 11:01 AM EDT/ 1501 GMT
                               Price                   
 US T BONDS JUN8               140-29/32    -0-5/32    
 10YR TNotes JUN8              118-140/256  -0-16/256  
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             1.8825       1.9178     0.003
 Six-month bills               2.0375       2.0873     0.002
 Two-year note                 99-154/256   2.5851     0.000
 Three-year note               99-160/256   2.7563     0.000
 Five-year note                99-44/256    2.9306     0.006
 Seven-year note               98-228/256   3.0531     0.006
 10-year note                  98-36/256    3.0927     0.013
 30-year bond                  98-68/256    3.2155     0.007
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        22.50         1.00     
 spread                                                
 U.S. 3-year dollar swap        16.75         1.00     
 spread                                                
 U.S. 5-year dollar swap         9.00         1.00     
 spread                                                
 U.S. 10-year dollar swap        3.00         0.25     
 spread                                                
 U.S. 30-year dollar swap       -8.25        -0.25     
 spread                                                
 
   

    
 (Reporting by Richard Leong
Editing by Paul Simao)
  
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