August 18, 2017 / 5:57 PM / 2 years ago

TREASURIES-U.S. yields rise as White House confirms Trump adviser's exit

    * Bannon's exit lifts stocks, reduces bond demand
    * Doubts on efforts to lift economy underpin bids for bonds
    * Finland attack underpins investor unease before weekend
    * Consumer sentiment rebounds in early August -U Michigan

    By Richard Leong
    NEW YORK, Aug 18 (Reuters) - U.S. Treasury yields nudged
higher on Friday as the exit of senior White House adviser
Stephen Bannon, known for his economic nationalist views,
revived the appetite for stocks and reduced it for
lower-yielding bonds.
    Some investors and corporate executives have worried about
Bannon's far-right political views, including on immigration, as
well as his influence on trade policy and other parts of the
White House's economic agenda.
    What has driven this week's bond market move has been
"largely political. You have had a lot of drama in Washington,"
said Michael Schumacher, head of rate strategy at Wells Fargo
Securities in New York.
    At 1:40 p.m. (1740 GMT), the 10-year Treasury yield
 was 2.203 percent, up 0.6 basis point from late on
Thursday, while the 30-year yield was 2.784 percent,
marginally higher on the day.
    News outlets, citing various sources, reported White House
Chief of Staff John Kelly would soon decide on Bannon's job.

    Shortly after those reports, White House spokeswoman Sarah
Sanders said in a statement that Kelly and Bannon had agreed
that Friday would be Bannon's last day in the job. 
    All of Wall Street's three major indexes
 erased earlier losses on reports of Bannon's departure.
The S&P 500 and Nasdaq were modestly higher, while the Dow Jones
Industrial Average was little changed.
    Earlier on Friday, benchmark yields hit near a seven-week
low on worries about U.S. President Trump's ability to enact tax
cuts, major infrastructure spending and other parts of his
economic agenda.
    Those concerns emerged in the aftermath of his comments on
last weekend's clash between white nationalists and
counter-protesters in Charlottesville, Virginia. 
    Trump has blamed that violence on not just the white
nationalists but also counter-protesters, and said there were
"very fine people" in both groups. His remarks drew widespread
rebukes from lawmakers, business leaders and U.S. allies.
    They also spurred speculation on possible resignations from
Trump's Cabinet, especially Gary Cohn, who is the director of
the National Economic Council. Rumors on social media that Cohn
might quit unleashed a selloff on Thursday in Wall Street stocks
and spurred safe-haven demand for Treasuries.
    Investor anxiety was also elevated following a knife attack
that injured several people in the Finnish city of Turku. It
came a day after a van killed 13 and wounded scores of others in
Barcelona. Islamic State has claimed responsibility for the
attack in Spain.
    On the data front, U.S. consumer sentiment improved to its
strongest level in seven months in early August, reflecting
confidence in the outlook for the economy and in personal
finances as the U.S. stock market holds near record highs, the
University of Michigan said on Friday.
  August 18 Friday 1:41PM New York / 1741 GMT
 US T BONDS SEP7               155-23/32    0-1/32    
 10YR TNotes SEP7              126-172/256  -0-12/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1            1.0163    0.012
 Six-month bills               1.105        1.1265    0.000
 Two-year note                 100-28/256   1.3177    0.012
 Three-year note               100-22/256   1.4704    0.005
 Five-year note                100-126/256  1.7705    0.008
 Seven-year note               100-176/256  2.0183    0.004
 10-year note                  100-112/256  2.2009    0.004
 30-year bond                  99-92/256    2.7816    0.000
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        26.25        -1.25    
 U.S. 3-year dollar swap        20.50         0.00    
 U.S. 5-year dollar swap         6.75        -0.50    
 U.S. 10-year dollar swap       -5.00         0.25    
 U.S. 30-year dollar swap      -33.75         1.00    

 (Reporting by Richard Leong; Editing by Paul Simao)
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