(Updates market action, adds quote, table, graphics)
* U.S. manufacturing activity rebounds in March - ISM
* China's factory growth resumes for first time in four months
* U.S. retail sales fall short of expectations in February
* U.S. 3-month, 10-year yield curve steepest in 2 weeks
NEW YORK, April 1 (Reuters) - U.S. Treasury yields rose to one-week peaks on Monday as encouraging data on manufacturing activity reduced fears about a looming U.S. recession, spurring some investors to scale back their safe-haven holdings of bonds. The bond market's wobbly start to the second quarter followed a solid first quarter, driven by worries about a global economic slowdown and the Federal Reserve signaling it would not raise interest rates in 2019. "We are going from a bad situation to a less bad situation. The (manufacturing data) had a impact for sure," said Ellis Phifer, senior market strategist at Raymond James in Memphis, Tennessee. The Institute for Supply Management said its index on U.S. domestic factory activity rose to 55.3 in March, higher than what analysts polled by Reuters had expected. China's manufacturing sector unexpectedly returned to growth for the first time in four months in March, data showed earlier on Monday. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) expanded at the strongest pace in eight months, rising to 50.8 from 49.9 in February. At 12:06 p.m. (1606 GMT), the yields on benchmark 10-year Treasury notes jumped 7.1 basis points to 2.4849 percent. It reached 2.49 percent, the highest in more than a week. Last week, 10-year yields fell to 2.340 percent, which was their lowest levels in 15 months. On March 22, they fell below three-month bill rates for the first time since 2007. The inversion between three-month rates and 10-year yields fed speculation about a U.S. recession. This yield curve phenomenon preceded each recession in the past 50 years. With 10-year yields back above three-month rates since Friday, analysts said the chances of a looming recession have faded a bit as data still suggest the economic expansion will likely persist in 2019. Still the surprise drop on U.S. retail sales in February reinforced the view of a deceleration in economic activity in the first quarter. Lingering economic worries, analysts say, will limit the rise in bond yields following a solid first-quarter when Treasuries generated 2.1 percent total return based on data from Barclays and Bloomberg. Treasuries trailed a blockbuster quarter for Wall Street where the S&P 500 jumped 13.1 percent, which was the strongest quarterly gain since third quarter of 2009. April 1 Monday 12:03PM EDT/ 1603 GMT Price
US T BONDS JUN9 148-11/32 -1-10/3210YR TNotes JUN9 123-168/256 -0-144/25
6
Price Current NetYield % Change
(bps)
Three-month bills 2.35 2.3961 -0.004Six-month bills 2.3725 2.4405 0.000Two-year note 99-218/256 2.3265 0.053Three-year note 100-68/256 2.2812 0.057Five-year note 99-38/256 2.3065 0.063Seven-year note 99-20/256 2.3939 0.07310-year note 101-52/256 2.4866 0.07330-year bond 102-84/256 2.8831 0.063
DOLLAR SWAP SPREADS
Last (bps) Net
Change (bps)
U.S. 2-year dollar swap 11.50 0.00
spread
U.S. 3-year dollar swap 8.75 -0.25
spread
U.S. 5-year dollar swap 5.00 0.00
spread
U.S. 10-year dollar swap 0.00 0.00
spread
U.S. 30-year dollar swap -23.00 0.75
spread
(Reporting by Richard Leong; Editing by Andrea Ricci)