September 13, 2019 / 7:36 PM / 5 days ago

TREASURIES-U.S. yields rise to multi-week highs on fading trade tensions, data

    * U.S. retail sales rise more than expected
    * China exempts some U.S. goods from additional tariffs
    * Highest weekly rise since June 2013 for 10-year yields
    * Biggest weekly increase since Nov 2016 for 30-year yields
    * Largest weekly gain since June 2009 for U.S. 2-year yield 
    * U.S. curve steepens, gap widest in four weeks

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 13 (Reuters) - U.S. Treasury yields climbed
to multi-week peaks on Friday, as trade tensions between the
United States and China eased further after more conciliatory
measures, with U.S. recession risks continuing to diminish after
stronger-than-expected retail sales data.
    U.S. yields rose for five straight sessions.
    Yields on U.S. benchmark 10-year notes and 2-year notes hit
six-week highs, while those on 30-year bonds hit five-week
peaks. The 10-year yield posted its largest weekly rise since
June 2013, while the 30-year yields had their biggest weekly
increase since U.S. President Donald Trump's election in
November 2016.
    On the short end of the curve, the U.S. 2-year yield had its
highest weekly increase since June 2009.
    After inverting in August, the U.S. yield curve steepened a
bit more on Friday, a sign that recession worries are abating.
The spread between U.S. 2-year note and 10-year note yields
widened to as much as nearly 11 basis points, the
steepest curve in four weeks. 
    "We have the continued warming of relationships over the
trade talks. And we have the consumer still strong with retail
sales, and those two just added fuel to the fire," said Ellis
Phifer, market strategist at Raymond James in Memphis,
Tennessee. 
    "Have we turned the corner on (interest) rates? I don't know
if it's a complete turn. We have had a reversal for now, but we
have trade talks coming up and we have the Federal Reserve
meeting coming up. There is a lot of potential news that could
turn us back around."
    On Friday, China's official Xinhua News Agency reported that
Beijing will exempt some agricultural products from additional
tariffs on U.S. goods. The United States and China have both
made amicable gestures, with China renewing purchases of U.S.
farm goods and Trump delaying a tariff increase on certain
Chinese goods.
    On the data front, U.S. retail sales increased more than
expected in August, rising 0.4%, lifted by spending on motor
vehicles, building materials, healthcare and hobbies. The
consensus forecast was for a 0.2% gain in August. 
    Excluding automobiles, gasoline, building materials and food
services, retail sales climbed 0.3% last month.
    In afternoon trading, U.S. benchmark 10-year note yields
 rose to 1.901% from 1.791% late on Thursday, hitting
a six-week high of 1.903%.
    Yields on 30-year bonds were also higher at 2.373%
 from 2.264% on Thursday, touching a five-week high
of 2.378%.
    U.S. 2-year yields, on the other hand, hit a six-week peak
of 1.802%. They were last up at 1.799%, from
Thursday's 1.727%.
    "We had quite a run after the July Fed meeting, and yields
fell precipitously," said Lou Brien, market strategist at DRW
Trading in Chicago. "So sometimes it's like water in a bathtub
where water splashes up against one side and then inevitably
splashes against the other."
    
      September 13 Friday 3:14PM New York / 1914 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.9225       1.9637    0.008
 Six-month bills               1.87         1.9189    0.021
 Two-year note                 99-108/256   1.802     0.075
 Three-year note               99-60/256    1.7634    0.091
 Five-year note                97-160/256   1.7524    0.101
 Seven-year note               97-8/256     1.8315    0.104
 10-year note                  97-140/256   1.8976    0.107
 30-year bond                  97-116/256   2.3693    0.105
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -1.75         0.00    
 spread                                               
 U.S. 3-year dollar swap        -4.75        -0.50    
 spread                                               
 U.S. 5-year dollar swap        -6.50         0.25    
 spread                                               
 U.S. 10-year dollar swap      -11.50         0.50    
 spread                                               
 U.S. 30-year dollar swap      -41.50         1.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Kevin
Liffey, Steven Orlofsky and Jonathan Oatis)
  
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