×

TREASURIES-Upbeat retail sales data lift U.S. bond yields

* Strong retail sales data raise bets on rate hike in March

* Some profit-taking seen on gains after Fed meeting

* ECB's pledge on easy policy keeps lid on yield rise

NEW YORK, Dec 14 (Reuters) - U.S. Treasury yields rose on Thursday as surprisingly strong data on retail sales in November supported the view of solid economic growth in the fourth quarter and further interest rate rises from the Federal Reserve. Traders also booked some profits from Wednesday's bond market rally following a disappointing report on consumer prices in November and the Federal Reserve's assessment that U.S. inflation would remain tame despite policy-makers' view of faster U.S. growth in 2018 and 2019. "We are giving back some of the post-Fed gains," said John Canavan, market strategist at Stone & McCarthy Research Associates in New York. "The retail sales data also helped push up yields but they have come off a bit since." The Commerce Department said on Thursday retail sales grew 0.8 percent last month, beating a median forecast of 0.3 percent among analysts polled by Reuters. The store sales data buttressed expectations of a gross domestic product figure for the fourth quarter, setting up for a possible rate increase from the Fed at its March 2018 meeting. Interest rates futures suggested traders priced in about a 56 percent chance of a rate hike next March after the November retail sales report, CME Group's FedWatch tool showed. Wall Street's top banks expected the U.S. central bank would raise key borrowing costs three times in 2018, matching the number of increases this year and what was projected among policy-makers, according to a Reuters polled conducted on Wednesday. Thursday's yield rise was capped by the European Central Bank's pledge to maintain its easy monetary policy stance even as it upgraded its growth and inflation forecasts for the euro zone. At 10:10 a.m. (1510 GMT), the benchmark 10-year Treasury yield was 2.380 percent, up 3 basis points from late Wednesday. The two-year yield rose nearly 4 basis points to 1.819 percent but still below the nine-plus year peak at 1.852 percent set on Wednesday, while the five-year yield increased over 4 basis points to 2.154 percent, which was short of the 6-1/2 year high of 2.199 percent seen on Wednesday. The yield spread between five-year and 30-year Treasuries shrank to 59.5 basis points from 62.0 basis points on Wednesday, Tradeweb data showed. December 14 Thursday 10:13AM New York / 1513 GMT Price

US T BONDS MAR8 153-10/32 -0-12/32 10YR TNotes MAR8 124-88/256 -0-68/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 1.3 1.3224 0.017 Six-month bills 1.445 1.4758 0.008 Two-year note 99-220/256 1.8232 0.041 Three-year note 99-210/256 1.9369 0.040 Five-year note 99-72/256 2.1535 0.044 Seven-year note 98-236/256 2.2934 0.039 10-year note 98-220/256 2.3797 0.031 30-year bond 99-248/256 2.7515 0.016 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 55.50 -0.90 30-year vs 5-year yield 59.50 -2.55

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 19.75 -0.50

spread

U.S. 3-year dollar swap 17.50 0.00

spread

U.S. 5-year dollar swap 5.50 -0.50

spread

U.S. 10-year dollar swap -0.50 -0.75

spread

U.S. 30-year dollar swap -20.25 0.25

spread

(Reporting by Richard Leong; Editing by Susan Thomas)