January 16, 2020 / 7:42 PM / a month ago

TREASURIES-U.S. yields up on strong bank earnings and economic data

 (Adds market activity, fixed income strategist comment)
    By Ross Kerber
    BOSTON, Jan 16 (Reuters) - U.S. Treasury yields rose on
Thursday on positive economic data and bank earnings, and higher
demand for stocks.
    The benchmark 10-year yield was up 2.1 basis
points in afternoon trading at 1.8091%.
    U.S. equity indexes hit record highs on optimism over an
initial U.S.-China trade deal and a positive start to the
fourth-quarter earnings season.
    Equity buyers shifting out of debt were a factor in
Thursday's trading, said Guy LeBas, chief fixed income
strategist for Janney Montgomery Scott.
    "The risk-on theme courtesy of the equity markets is
triggering a little selling" of bonds, driving up yields, he
said.
    Other factors that boosted yields on Thursday included 
strong manufacturing data from the Mid-Atlantic region and
better-than-expected retail sales, said Tom di Galoma, managing
director of Seaport Global Holdings.
    "Certainly there's a little bit of pressure" for economic
activity to continue to increase, he said.   
    U.S. retail sales increased for a third straight month in
December, with households buying a range of goods even as they
cut back on purchases of motor vehicles, the Commerce Department
said on Thursday.
    Other data showed the number of Americans filing claims for
unemployment benefits dropped for a fifth straight week last
week, indicating the labor market remained strong despite a 
slowdown in job growth. 
    The Federal Reserve Bank of Philadelphia's business
conditions index for the U.S. Mid-Atlantic region rose to 17.0
from an upwardly revised 2.4 in December. That easily topped
expectations for a reading of 3.8 in January, according to a
Reuters poll of economists.
    Morgan Stanley reported a 46% jump in quarterly
profit and beat Wall Street estimates by a wide margin, the
latest sign that Chief Executive James Gorman's strategic vision
for the Wall Street bank is bearing fruit.         
  
    The two-year  U.S. Treasury yield, which
typically moves in step with interest rate expectations, was up
less than a basis point at 1.5698% in afternoon trading.
    
      January 16 Thursday 2:23PM New York / 1923 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5275       1.5589    -0.010
 Six-month bills               1.525        1.5624    -0.011
 Two-year note                 100-27/256   1.5698    0.008
 Three-year note               99-198/256   1.5778    0.011
 Five-year note                100-152/256  1.6247    0.022
 Seven-year note               100-24/256   1.7356    0.023
 10-year note                  99-120/256   1.8091    0.021
 30-year bond                  102-116/256  2.2614    0.019
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.75        -0.25    
 spread                                               
 U.S. 3-year dollar swap         3.50         0.00    
 spread                                               
 U.S. 5-year dollar swap         0.50        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -4.75        -0.75    
 spread                                               
 U.S. 30-year dollar swap      -31.25        -0.75    
 spread                                               
 

 (Reporting by Ross Kerber in Boston; Editing by David Gregorio
and Grant McCool)
  
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