Bonds News

TREASURIES-Yields rise as expected Quarles nomination seen helping banks

    * Quarles nomination seen helping banks
    * North Korea tensions, weak data boosts bond demand
    * 10-year note yields fall to five-month lows overnight

    By Karen Brettell
    NEW YORK, April 17 (Reuters) - U.S. Treasury yields rose
from five-month lows on Monday on reports that Randal Quarles, a
former Treasury Department official, is expected to be nominated
as the Federal Reserve's vice chairman for bank supervision,
which was seen as positive for bank growth.
    Quarles, a former top Treasury Department official during
the Bush administration, was viewed as likely to help boost
banks that have complained about new regulations implemented
since the financial crisis.            
    The Wall Street Journal late on Sunday and Bloomberg News on
Monday were among publications reporting Quarles' expected
    “The feeling is that he might start pushing through some
regulations that might help the banking sector, and take the
pressure off yields moving lower,” said Tom di Galoma, a
managing director at Seaport Global Holdings in New York.
    U.S. Treasury yields fell to five-month lows overnight as
rising geopolitical tensions in North Korea hurt risk appetite
and weak economic data boosted demand for the bonds.
    Benchmark 10-year notes             were last down 1/32 in
price to yield 2.232 percent, after dropping to 2.198 percent
overnight, the lowest since Nov. 17.
    The United States, its allies and China are working together
on a range of responses to North Korea's latest failed ballistic
missile test, U.S. President Donald Trump's national security
adviser said on Sunday, citing what he called an international
consensus to act.
    H.R. McMaster indicated that Trump was not considering
military action for now.             
    Weak U.S. retail sales and consumer price data on Friday,
when the bond market was closed, also put a dent in expectations
that growth will be sufficient for the Fed to raise interest
rates two more times this year.
    “The CPI number came out very weak on Friday, and weak PPI
on Thursday, so the inflation outlook doesn’t look all that
great for the Fed,” said di Galoma.
    The data showed that U.S. retail sales fell for a second
straight month in March and consumer prices dropped for the
first time in just over a year, underscoring a loss of economic
growth momentum in the first quarter.             
    Data on Thursday showed producer prices falling in March for
the first time in seven months.             
    Traders have been reducing expectations of tax reform in the
near-term as the Trump administration focuses on foreign
affairs. Tax reform and fiscal stimulus had been expected to
help bolster U.S. growth.

 (Editing by Meredith Mazzilli)