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TREASURIES-U.S. yields rise as White House confirms Trump adviser's exit

* Bannon's exit lifts stocks, reduces bond demand

* Doubts on efforts to lift economy underpin bids for bonds

* Finland attack underpins investor unease before weekend

* Consumer sentiment rebounds in early August -U Michigan

NEW YORK, Aug 18 (Reuters) - U.S. Treasury yields nudged higher on Friday as the exit of senior White House adviser Stephen Bannon, known for his economic nationalist views, revived the appetite for stocks and reduced it for lower-yielding bonds. Some investors and corporate executives have worried about Bannon's far-right political views, including on immigration, as well as his influence on trade policy and other parts of the White House's economic agenda. What has driven this week's bond market move has been "largely political. You have had a lot of drama in Washington," said Michael Schumacher, head of rate strategy at Wells Fargo Securities in New York. At 1:40 p.m. (1740 GMT), the 10-year Treasury yield was 2.203 percent, up 0.6 basis point from late on Thursday, while the 30-year yield was 2.784 percent, marginally higher on the day. News outlets, citing various sources, reported White House Chief of Staff John Kelly would soon decide on Bannon's job.

Shortly after those reports, White House spokeswoman Sarah Sanders said in a statement that Kelly and Bannon had agreed that Friday would be Bannon's last day in the job. All of Wall Street's three major indexes erased earlier losses on reports of Bannon's departure. The S&P 500 and Nasdaq were modestly higher, while the Dow Jones Industrial Average was little changed. Earlier on Friday, benchmark yields hit near a seven-week low on worries about U.S. President Trump's ability to enact tax cuts, major infrastructure spending and other parts of his economic agenda. Those concerns emerged in the aftermath of his comments on last weekend's clash between white nationalists and counter-protesters in Charlottesville, Virginia. Trump has blamed that violence on not just the white nationalists but also counter-protesters, and said there were "very fine people" in both groups. His remarks drew widespread rebukes from lawmakers, business leaders and U.S. allies. They also spurred speculation on possible resignations from Trump's Cabinet, especially Gary Cohn, who is the director of the National Economic Council. Rumors on social media that Cohn might quit unleashed a selloff on Thursday in Wall Street stocks and spurred safe-haven demand for Treasuries. Investor anxiety was also elevated following a knife attack that injured several people in the Finnish city of Turku. It came a day after a van killed 13 and wounded scores of others in Barcelona. Islamic State has claimed responsibility for the attack in Spain. On the data front, U.S. consumer sentiment improved to its strongest level in seven months in early August, reflecting confidence in the outlook for the economy and in personal finances as the U.S. stock market holds near record highs, the University of Michigan said on Friday. August 18 Friday 1:41PM New York / 1741 GMT Price

US T BONDS SEP7 155-23/32 0-1/32 10YR TNotes SEP7 126-172/256 -0-12/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 1 1.0163 0.012 Six-month bills 1.105 1.1265 0.000 Two-year note 100-28/256 1.3177 0.012 Three-year note 100-22/256 1.4704 0.005 Five-year note 100-126/256 1.7705 0.008 Seven-year note 100-176/256 2.0183 0.004 10-year note 100-112/256 2.2009 0.004 30-year bond 99-92/256 2.7816 0.000

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 26.25 -1.25

spread

U.S. 3-year dollar swap 20.50 0.00

spread

U.S. 5-year dollar swap 6.75 -0.50

spread

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

spread

U.S. 30-year dollar swap -33.75 1.00

spread

(Reporting by Richard Leong; Editing by Paul Simao)