February 8, 2018 / 2:32 PM / 11 days ago

TREASURIES-Yields rise on hawkish Bank of England, before supply

    * Bank of England may accelerate rate increases
    * Treasury to sell $16 bln 30-year bonds

    By Karen Brettell
    NEW YORK, Feb 8 (Reuters) - U.S. benchmark Treasury yields
rose on Thursday to approach their highest levels in four years
after the Bank of England said interest rates probably need to
rise sooner, adding to expectations of reduced central bank
stimulus globally.
    Bonds have weakened in the past week-and-a-half as investors
adjust for the likelihood of a stronger U.S. economy and higher
inflation, which could lead the Federal Reserve to boost rates
more times than previously anticipated.
    An improving outlook internationally is adding to pressure
on global fixed income markets. The BoE raised its growth
forecasts for Britain due to the strong global recovery.
            
    “We’ve got yet another confirmation that a major central
bank is wringing its hands over the possibility that economic
growth is accelerating beyond current capacity,” said Jim Vogel,
an interest rate strategist at FTN Financial in Memphis,
Tennessee.
    Benchmark 10-year note yields             rose as high as
2.875 percent after the meeting, just below Monday’s four-year
high of 2.885 percent. The notes were last down 9/32 in price to
yield 2.866 percent.
    Investors are also preparing for a large uptick in U.S.
government debt issuance this year to make up for declining
purchases by the U.S. central bank.
    Thirty-year bond yields rose to their highest levels in
almost a year before the government is due to sell $16 billion
in 30-year bonds on Thursday, the final sale of $66 billion in
coupon-bearing supply this week.
    The United States saw slightly soft demand for a $24 billion
sale of 10-year notes on Wednesday and a $26 billion sale of
three-year notes on Tuesday.                          
    Debt needs may rise further after U.S. Senate leaders
reached a deal on Wednesday to raise spending on military and
domestic programs by almost $300 billion over the next two years
that will add to the deficit.             
    Thirty-year bonds             were last down 23/32 in price
to yield 3.155 percent, after earlier rising to 3.167 percent,
the highest since March 15.
    Next week’s consumer price and retail sales data is the next
major economic focus for the market and will be closely
scrutinized for further indications of rising price pressures.

 (Editing by Bernadette Baum)
  
 
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