February 12, 2018 / 8:57 PM / 3 months ago

TREASURIES-U.S. 10-year yields hit 4-year high, as safe-haven trade fades

    * U.S. 30-year touch 11-month peak
    * U.S. safe haven bids in Treasuries slow amid stock rally
    * Trump unveils new budget

 (Recasts first paragraph, adds comment, updates prices, table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Feb 12 (Reuters) - U.S. Treasury yields rose on
Monday, with benchmark 10-year yields hitting a four-year high
and those on 30-year bonds climbing to an 11-month peak, as a
stock rally and improving risk appetite diminished the
safe-haven appeal of government debt.
    U.S. 10-year yields, which move inversely to prices, have
risen in three of the last five sessions. Since a 10-month low
hit in September, 10-year yields have risen nearly 90 basis
points. The yields' outperformance overall, though, was being
led by U.S. 7-year and 5-year notes.
    "With the equity market doing better today, there was some
confidence that the volatility that characterized last week
would not continue," said Tom Simons, money market economist, at
Jefferies in New York.
    "So perhaps there's a little less need for that safe-haven
trade," he added.
    Analysts also said yields have also been boosted by strong
U.S. economic growth prospects and global central banks
normalizing years of easy monetary policy.
    "Yields have been rising because U.S. fundamentals are solid
and also because we're seeing a global normalization of monetary
policy that have driven term premiums higher," said Bruno
Braizinha, interest rates strategist at Societe Generale in New
York.
    The U.S. equity market, however, has been flustered by the
rise in yields, on concerns it could trigger a surge in
borrowing costs for U.S. corporations and households that could
hamper economic growth.
    On Monday, Wall Street was trading higher, and Braizinha
said one reason could be that equity investors believe the
current range in the U.S. 10-year note yield of between
2.80-2.90 percent would hold for now. 
    In late trading, U.S. 10-year yields were up at
2.851 percent, from 2.831 percent late on Friday. Earlier in the
session, 10-year yields hit 2.902 percent, the highest since
January 2014.
    U.S. 30-year bond yields rose to 3.145 percent,
from Friday's 3.139 percent. The yield on this maturity touched
an 11-month peak of 3.139 percent earlier in the session.
    Analysts also said concerns about U.S. budget deficit
spending weighed on Treasury prices.
    President Donald Trump on Monday unveiled his second budget,
which calls for cuts in domestic programs and seeks a sharp
increase in military spending and funding for a wall on the
Mexican border.
    Investors are also bracing for U.S. inflation data this
week, which should shed more light on whether the recent run-up
in yields is justified.
    "There have been a number of good reasons to believe that
inflation pressures are increasing," said Jefferies' Simons. 
    
      February 12 Monday 3:51PM New York / 2051 GMT
                               Price                  
 US T BONDS MAR8               144-15/32    0-10/32   
 10YR TNotes MAR8              120-236/256  -0-64/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.545        1.5723    0.010
 Six-month bills               1.745        1.7845    0.049
 Two-year note                 99-220/256   2.0732    0.012
 Three-year note               99-218/256   2.3015    0.038
 Five-year note                99-46/256    2.5519    0.036
 Seven-year note               98-96/256    2.758     0.034
 10-year note                  99-32/256    2.8512    0.020
 30-year bond                  97-108/256   3.1332    -0.006
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        28.00         0.75    
 spread                                               
 U.S. 3-year dollar swap        18.75        -0.50    
 spread                                               
 U.S. 5-year dollar swap         9.50         0.00    
 spread                                               
 U.S. 10-year dollar swap        1.00         0.50    
 spread                                               
 U.S. 30-year dollar swap      -17.00         2.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Susan Thomas
and Jonathan Oatis)
  
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