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Bonds News

TREASURIES-Yields rise to five-month peaks in line with German, UK bonds

* Yields on German bunds, UK bonds rise

* U.S. data mixed, but supportive of yields overall (Adds comment, details, updates prices)

NEW YORK, Oct 27 (Reuters) - U.S. Treasury debt yields climbed to roughly five-month peaks on Thursday, driven by gains in German and British bonds as well as upbeat U.S. jobless claims data that point to another robust non-farm payrolls number next week.

“A lot of the moves today in Treasuries are being led by the dramatic steepening of the bund (German bonds) and gilt (UK bonds) curve,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.

German 10-year bund yields rose to five-month peaks , while that of 10-year British bonds advanced to more than four-month highs, lifting U.S. Treasury yields in the process.

Strong growth data in Britain prompted a sell off in the world’s largest benchmark bonds on Thursday, with investors believing the Bank of England is now less likely to cut rates at its policy meeting next week.

With gains on the long end, the Bund yield curve has steepened to nearly 79 basis points, its widest since early March, while the spread between long-term and short-term gilts rose to 95 basis points, the highest in four months.

Societe’s Rajappa said the gap between long-term and short-term yields on bunds and gilts have widened on the belief that both the Bank of England and European Central Bank would hold off on further easing. In the case of the ECB, while the market believes the bank will extend asset buying beyond the March deadline, the expectation is that it will slow the pace of its bond purchases.

The spread between short-and long-term U.S. Treasury yields curve have also increased as a result to 127.30 basis points. .

In late morning trading, benchmark 10-year Treasury notes were down 22/32 in price to yield 1.867 percent, up from 1.79 percent late on Wednesday. Earlier, 10-year yields hit a five-month high of 1.87 percent.

U.S. 30-year bonds were down more than a point in price to yield 2.628 percent, up from Wednesday’s 2.537 percent. Thirty-year yields earlier hit a five-month peak of 2.631 percent.

U.S. two-year note yields were at 0.896 percent, up from Wednesday’s 0.872 percent. Earlier on Thursday, two-year yields touched five-month highs of 0.896 percent.

Yields also were boosted by data showing U.S. jobless claims dropping 3,000 to a seasonally adjusted 258,000 for the week ended Oct. 22. That marked 86 straight weeks that claims have been below the 300,000 threshold, which is normally associated with a strong job market. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama)

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