* 10-yr yields hit roughly 1-1/2-year high of 2.492 pct
* 30-yr yields hit 16-1/2-month high of 3.156 pct
* Trump policies, rally in oil prices boost inflation
* Upbeat U.S. manufacturing data contributes to higher
(Updates prices, adds comment)
By Sam Forgione
NEW YORK, Dec 1 U.S. Treasury yields surged on
Thursday with benchmark yields touching their highest levels in
roughly a year and a half on expectations that gains in oil
prices and U.S. President-elect Donald Trump's policies would
fuel higher inflation.
Brent crude prices built on Wednesday's gains with a more
than 4 percent jump a day after OPEC and Russia agreed to
restrict output. The rally in crude, along with expectations
that Trump will enact policies that increase spending and debt
as well as spur growth and inflation, pushed Treasury yields
Inflation erodes bond prices, with 10- and 30-year
Treasuries most vulnerable. A stronger-than-expected U.S.
manufacturing reading for November and a rise in U.S.
construction spending in October also boosted
"Investors are building the possibility of inflation into
the Treasury curve," said Ellis Phifer, market strategist at
Raymond James in Memphis, Tennessee.
Benchmark 10-year yields hit 2.492 percent, their highest
level since June 11, 2015, while 30-year yields hit a 16-1/2
month high of 3.156 percent. U.S. five-year yields hit a more
than 5-1/2-year high of 1.935 percent, while seven-year yields
hit a more than two-year high of 2.295 percent.
U.S. two-year yields hit just a six-day high of 1.167
percent, while three-year yields hit their highest since
mid-February 2011 at 1.469 percent.
Comments on Wednesday from Steven Mnuchin, Trump's pick to
lead the U.S. Treasury, on introducing a longer-maturity bond
added to expectations that long-end rates would increase
further, said Kim Rupert, managing director for fixed income at
Action Economics in San Francisco.
The continued surge in yields came after U.S. Treasuries
posted a negative 2.7 percent return in November to mark their
worst performance since January 2009, according to Bloomberg
Barclays index data, while the Bloomberg Barclays U.S. Aggregate
Bond Index posted a negative 2.4 percent return to mark its
worst monthly showing in at least 10 years.
Traders awaited U.S. monthly employment data due on Friday.
Economists polled by Reuters expect U.S. employers added 175,000
jobs last month.
U.S. 10-year Treasuries were last down 21/32 in
price to yield 2.4445 percent, up about eight basis points from
its yield late on Wednesday. U.S. 30-year Treasuries
were last down 1-19/32 in price to yield 3.1027 percent, also up
about eight basis points from late Wednesday's yield. Prices on
30-year Treasuries briefly fell more than two full points.
December 1 Thursday 3:25PM New York / 2025 GMT
US T BONDS MAR7 149-13/32 -1-28/32
10YR TNotes MAR7 123-248/256 -0-140/2
Price Current Net
Yield % Change
Three-month bills 0.4675 0.4745 -0.011
Six-month bills 0.5975 0.6076 -0.002
Two-year note 99-180/256 1.151 0.036
Three-year note 98-188/256 1.4392 0.049
Five-year note 99-80/256 1.8949 0.061
Seven-year note 99-50/256 2.25 0.072
10-year note 96-24/256 2.4445 0.077
30-year bond 95-160/256 3.1002 0.082
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 19.50 -0.75
U.S. 3-year dollar swap 11.50 -1.00
U.S. 5-year dollar swap -2.75 0.00
U.S. 10-year dollar swap -16.75 0.25
U.S. 30-year dollar swap -55.00 -0.75
(Reporting by Sam Forgione; Editing by Bill Trott and Meredith