U.S. yields rise on economic data, trade hopes

* Philly Fed, jobless claims data pare economic worries
* U.S.' Mnuchin mulled lifting levies on China - WSJ
* U.S. sells $13 bln 10-year TIPS to solid investor demand
* U.S. economy remains "very strong" - Fed's Quarles

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By Richard Leong
NEW YORK, Jan 17 (Reuters) - U.S. Treasury yields rose on
Thursday with the benchmark 10-year yield reaching near
three-week highs as better-than-expected economic data and hopes
for progress in U.S.-China trade talks diminished safe-haven
demand for government debt.
U.S. Treasury Secretary Steven Mnuchin had considered
removing some or all tariffs on Chinese imports in an effort to
resolve the stalemate between Beijing and the Trump
administration, the Wall Street Journal said, citing people
familiar with the internal deliberations.
A Treasury spokesperson told CNBC that Mnuchin had not made
any such recommendations, causing Treasury yields to retreat
from their session peaks.
This week's offering of corporate bonds put some upward
pressure on Treasury yields, as dealers sold Treasuries to lock
in borrowing costs on debt they underwrote and investors reduced
their U.S. government debt holdings to make room for the
corporate supply, traders and analysts said.
On the other hand, the historically long government shutdown
and uncertainty about Brexit have kept a lid on Treasury yields,
keeping them in a tight trading range.
"There are still a lot of geopolitic risks out there," said
Wen Lu, U.S. rates strategist at TD Securities in New York.
"Rates are going to stay in a range for the next couple of
The yield on benchmark 10-year Treasury notes
hit a near three-week peak of 2.761 percent. It was last 2.749
percent, 2.0 basis points higher than Wednesday's close.
Bond yields fell earlier Wednesday along with weaker U.S.
stock index futures after U.S. lawmakers introduced bills on
Wednesday that would ban the sale of U.S. computer chips or
other components to Chinese firms that violate U.S. sanctions or
export control laws.
This legislative move had pared optimism about Washington
and Beijing resolving their trade issues.
The initial safe-haven demand for Treasuries faded following
an unexpected fall in domestic first-time filings for
unemployment benefits last week and a stronger-than-forecast
increase in early January on a measure of Mid-Atlantic business
activity from the Philadelphia Federal Reserve.
The U.S. economy remains "very strong" with inflation
contained, Fed Governor Randal Quarles said.
The 10-year Treasury yield hit a near one-year low of 2.543
percent almost two weeks ago on concerns about weakening
economic growth and bets the U.S. central bank may not raise
interest rates in 2019.
On the supply front, companies have raised $21.4 billion
through investment-grade debt sales this week, according to IFR.

The Treasury Department sold $13 billion in 10-year Treasury
Inflation Protected Securities to solid
investor demand.
January 17 Thursday 3:23PM New York / 2023 GMT
US T BONDS MAR9 145-2/32 -4/32
10YR TNotes MAR9 121-124/256 -8/32
Price Current Net
Yield % Change
Three-month bills 2.3625 2.4095 -0.011
Six-month bills 2.4375 2.502 0.002
Two-year note 99-222/256 2.5699 0.023
Three-year note 99-216/256 2.5545 0.025
Five-year note 100-58/256 2.5758 0.031
Seven-year note 99-212/256 2.6521 0.030
10-year note 103-56/256 2.7486 0.020
30-year bond 105-220/256 3.0734 -0.002
YIELD CURVE Last (bps) Net
10-year vs 2-year yield 17.70 -0.25
30-year vs 5-year yield 49.60 -3.60
Last (bps) Net
U.S. 2-year dollar swap 15.75 -0.75
U.S. 3-year dollar swap 12.25 -0.25
U.S. 5-year dollar swap 8.75 -0.25
U.S. 10-year dollar swap 3.00 0.00
U.S. 30-year dollar swap -19.25 1.00

(Reporting by Richard Leong
Editing by Tom Brown)

2019-01-17 22:35:42

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