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TREASURIES-U.S. yields rise on reduced U.S.-North Korea tension, strong data

* North Korea's Kim said to delay strike towards Guam

* U.S. retail sales post biggest rise in seven months in July

* Weaker Wall Street stocks cap yield rise

NEW YORK, Aug 15 (Reuters) - U.S. Treasury yields rose on Tuesday, with benchmark yields hitting one-week highs as investors further pared low-risk bond holdings on signs of easing U.S.-North Korean tensions and strong domestic retail sales and regional factory activity data. Since the weekend, Washington and Pyongyang have ratcheted down rhetoric that had ignited fears of an imminent military showdown between the nations. On Tuesday, state media said North Korean leader Kim Jong Un has postponed a missile strike towards the U.S. territory of Guam. This development spurred more Treasuries selling overnight, propelling longer-dated yields further from the six-week lows reached last week. "The (safe-haven) rally was really running out of steam. The move accelerated in the wake of the strong retail sales number," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia. U.S. retail sales gained 0.6 percent in July, its biggest monthly increase in seven months, the Commerce Department said.

Another encouraging sign was an unexpectedly strong rise in an index on manufacturing activity in New York state from the New York Federal Reserve. Its barometer on the state's business conditions rose to 25.2 points in August, its highest since September 2014. Tuesday's upbeat economic data revived some bets the Fed may raise interest rates at its Dec. 12-13 policy meeting, but doubts remain on such a move in light of a recent string of disappointing inflation readings. "A December rate hike for the Fed is always on the table. That probability goes lower and lower with inflation being softer," said Sean Simko, head of fixed-income management in SEI in Oaks, Pennsylvania. Interest rates futures implied traders saw a 53 percent chance the Fed would raise rates in December, compared with about 42 percent late on Monday, CME Group's FedWatch program showed. At 10:37 a.m. (1437 GMT), the benchmark 10-year Treasury yield was 2.262 percent, up 4 basis points from Monday's close, while the 30-year yield was nearly 4 basis points higher on the day at 2.843 percent. Longer-dated yields retreated from their one-week highs as Wall Street stocks turned negative after a flat open. August 15 Tuesday 10:38AM New York / 1438 GMT Price

US T BONDS SEP7 154-13/32 -0-24/32 10YR TNotes SEP7 126-56/256 -0-84/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 1.0125 1.0292 0.000 Six-month bills 1.1275 1.1497 0.008 Two-year note 100-16/256 1.3424 0.024 Three-year note 99-250/256 1.508 0.035 Five-year note 100-78/256 1.8104 0.039 Seven-year note 100-80/256 2.0765 0.043 10-year note 99-236/256 2.2588 0.041 30-year bond 98-36/256 2.8425 0.036

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 25.50 -0.25

spread

U.S. 3-year dollar swap 19.50 -0.75

spread

U.S. 5-year dollar swap 7.25 -0.25

spread

U.S. 10-year dollar swap -5.00 -0.25

spread

U.S. 30-year dollar swap -33.50 0.25

spread

(Reporting by Richard Leong; Editing by Meredith Mazzilli)