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TREASURIES-Yields inch up from depressed levels on U.S. data, Fed aftermath

* U.S. jobless claims, Philly Fed stronger-than-expected

* Most yields remain near depressed levels after Wednesday plunge

* Two-year yields hit highest in three months

NEW YORK, June 15 (Reuters) - U.S. Treasury yields edged higher on Thursday after some stronger-than-expected U.S. economic data, with two-year yields touching their highest in three months, although most yields remained depressed after their biggest plunge in a month Wednesday. Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 237,000 for the week ended June 10, the Labor Department said on Thursday. Economists had forecast first-time applications for jobless benefits falling to 242,000 in the latest week. In addition, June readings of the New York Fed's Empire State business conditions index and the Philadelphia Fed business conditions index both beat economists' expectations.

U.S. two-year yields hit 1.368 percent, the highest since mid-March, in the wake of the Federal Reserve's second interest rate increase of the year on Wednesday and the U.S. economic data. Three-year yields briefly jumped above 1.5 percent after hitting an eight-day low of 1.417 percent Wednesday. Short-dated yields are most sensitive to Fed rate movements. While yields on Treasuries maturing between five and 30 years inched up, they were not far from their lowest levels since November touched Wednesday after government data on inflation and retail sales for May fell well short of market expectations. Analysts said traders continued to doubt the Fed would be able to raise interest rates for a third time this year, as the central bank projected Wednesday, given soft inflation readings. "We are still pretty much making baby steps after yesterdays rally," said Stanley Sun, interest rate strategist at Nomura Securities International in New York. "There is definitely a little bit of the market being skeptical of how far the Fed can raise rates this year and also beyond." Benchmark 10-year Treasuries were last down 4/32 in price to yield 2.153 percent, from a yield of 2.138 percent late Wednesday. Benchmark yields hit 2.103 percent Wednesday, their lowest since Nov. 10. "There is still a lot of uncertainty" about U.S. growth, said Kim Rupert, managing director for fixed income at Action Economics in San Francisco. Other data showing import prices recorded their biggest drop in 15 months in May suggested domestic inflation measures could remain soft for a while. That low inflation outlook helped keep long-dated yields anchored, Rupert said. She said most yields were still pressured a bit higher partly in response to a rise in European debt yields after a hawkish Bank of England vote.

June 15 Thursday 11:16AM New York / 1516 GMT Price

US T BONDS SEP7 155-17/32 -0-3/32 10YR TNotes SEP7 126-184/256 -0-52/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 0.9975 1.0139 0.003 Six-month bills 1.1025 1.124 0.005 Two-year note 99-204/256 1.3555 0.012 Three-year note 100-8/256 1.4893 0.016 Five-year note 99-252/256 1.7532 0.028 Seven-year note 100-40/256 1.9758 0.024 10-year note 101-240/256 2.1568 0.019 30-year bond 104-108/256 2.7812 -0.002

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 19.00 0.50

spread

U.S. 3-year dollar swap 17.25 0.25

spread

U.S. 5-year dollar swap 8.75 0.25

spread

U.S. 10-year dollar swap -1.75 0.50

spread

U.S. 30-year dollar swap -36.00 1.25

spread

(Reporting by Sam Forgione; Editing by Chris Reese)