TREASURIES-Benchmark yields at 10-month high on strong China data

* U.S. 10-year yields hit highest since March

* 10-year inflation breakeven rate highest since March

* Two-year yields highest since September 2008

NEW YORK, Jan 18 - Yields on U.S. 10-year notes reached a 10-month high on Thursday after China reported fourth-quarter growth that accelerated for the first time in seven years. China's gross domestic product grew 6.8 percent in the October to December period from a year earlier. An export recovery helped the country post an annual acceleration in growth, defying concerns that intensifying curbs on industry and credit would hurt expansion. After a week abutting 2.60 percent, the 10-year U.S. Treasury yield passed that mark to hit its highest level since March 2017. The strong data out of China also pressured European bonds, with Germany's benchmark 10-year note yield rising to 0.595 percent, the highest since July. Also pushing yields higher was Apple's announcement that it would open a new campus as part of a $30 billion U.S. investment plan and will make a $38 billion one-time tax payment on its overseas cash. Apple has parked much of its overseas profit in debt, holding about $52.5 billion in Treasury bonds and $150.7 in corporate securities. The concern is not simply that Apple would sell Treasuries to pay these bills, but that a number of multinationals could do the same. "Its not like its a large chunk of cash coming back," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. "But the question is, are other corporations going to do the same - is Apple just the first?" Also on Thursday, the U.S. bond market's gauge of inflation expectations reached their highest levels since March in advance of a $13 billion auction of 10-year Treasury Inflation-Protected Securities (TIPS) at 1 p.m. (1800 GMT). At 10:00 a.m. (1500 GMT), the 10-year inflation breakeven rate, or the yield gap between 10-year TIPS and regular 10-year Treasury notes, was 2.07 percent, up 1.5 basis points from late Wednesday, Tradeweb and Reuters data showed.

"The market seems to be positioned long in breakevens in anticipation of a pickup in inflation," Rajappa said. At 10:00 a.m.(1500 GMT), 10-year Treasury yields were 2.603 percent, above Wednesday's close at 2.578 percent. Two-year yields were 2.051 percent, after hitting 2.060 percent earlier in the day, the highest since September 2008.

January 18 Thursday 10:09AM New York / 1509 GMT Price

US T BONDS MAR8 149-24/32 -0-18/32 10YR TNotes MAR8 122-128/256 -0-40/25


Price Current Net Yield % Change


Three-month bills 1.4275 1.4525 0.007 Six-month bills 1.6075 1.6431 0.013 Two-year note 99-170/256 2.0516 0.009 Three-year note 99-130/256 2.1709 0.008 Five-year note 98-174/256 2.4096 0.016 Seven-year note 98-48/256 2.5361 0.020 10-year note 96-248/256 2.6016 0.024 30-year bond 97-140/256 2.8729 0.025


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 20.25 0.25


U.S. 3-year dollar swap 19.25 0.75


U.S. 5-year dollar swap 5.50 0.50


U.S. 10-year dollar swap 0.50 0.00


U.S. 30-year dollar swap -17.00 -0.25


(Reporting by Kate Duguid; Editing by Susan Thomas)