×

TREASURIES-Yields advance after strong U.S. durables data, Fed chair talk

NEW YORK, Oct 25 (Reuters) - U.S. long-dated Treasury yields rose to multi-month highs on Wednesday, boosted by a strong U.S. durable goods report, optimism about tax reform and the upcoming announcement of President Donald Trump's nominee to head the Federal Reserve. Benchmark U.S. 10-year note yields hit seven-month highs, while yields on 30-year bonds climbed to five-month peaks. U.S. two-year note yields also advanced, hitting their highest in nine years. Yields extended gains after data showing new orders for key U.S.-made non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 1.3 percent last month after an upwardly revised 1.3 percent increase in August. U.S. shipments rose for an eighth straight month, pointing to robust business spending that should help mitigate the impact of recent hurricanes on the economy. "The rise in yields was put underway even prior to this morning's strong durable goods report," said Bill Northey, chief investment officer at U.S. Bank Wealth Management in Helena, Montana. "If you look across what has happened the last seven to 10 days, there has been additional traction on tax reform, which has clearly put some upward pressure on rates." Northey also pointed to the narrowing of candidates to three for the Fed chairmanship. Current Fed Chair Janet Yellen, Stanford University economist John Taylor, and Fed Governor Jerome Powell were viewed as front-runners for the job. Bloomberg reported late on Tuesday that according to Republican U.S. Senator Tim Scott, Taylor had emerged as the winner when Trump asked Senate Republicans for a show of hands in support of potential nominees for the Fed role. In mid-morning trading, 10-year U.S. Treasury note prices were down 13/32, yielding 2.455 percent, up from Tuesday's 2.406 percent. Earlier, 10-year yields rose to 2.475 percent, the highest since March 21. Traders are now eyeing a key 2.5 percent level. U.S. 30-year bond prices fell 26/32, yielding 2.965 percent , down from 2.923 percent late on Tuesday. Thirty-year yields had risen to a five-month high of 2.980 percent. Later on Wednesday, Treasury will sell $34 billion in 5-year notes and $15 billion in 2-year floating rate notes. Ahead of the auction, U.S. five-year notes were down 6/32 in price, yielding 2.067 percent. Five-year yields earlier touched 2.089 percent, their strongest level in more than seven months. U.S. two-year note yields were at 1.602 percent, up from 1.577 percent the previous session. Earlier on Wednesday, two-year yields hit a fresh nine-year peak of 1.623 percent.

October 25 Wednesday 10:17 AM New York/1417 GMT Price

US T BONDS DEC7 150-26/32 -0-28/32 10YR TNotes DEC7 124-104/256 -0-84/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 1.1025 1.1209 -0.005 Six-month bills 1.2525 1.278 0.005 Two-year note 99-204/256 1.6029 0.026 Three-year note 99-174/256 1.7361 0.022 Five-year note 99-28/256 2.0659 0.039 Seven-year note 98-244/256 2.2891 0.044 10-year note 98-64/256 2.4517 0.046 30-year bond 95-208/256 2.9624 0.039

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 22.75 -1.25

spread

U.S. 3-year dollar swap 22.50 0.25

spread

U.S. 5-year dollar swap 7.25 0.00

spread

U.S. 10-year dollar swap -2.25 0.00

spread

U.S. 30-year dollar swap -28.75 0.50

spread

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith Mazzilli)