U.S. yields drift higher as risk sentiment improves
By Gertrude Chavez-Dreyfuss NEW YORK, Aug 14 (Reuters) - U.S. Treasury yields edged higher on Tuesday, tracking the European bond market, as global sentiment improved after equities worldwide stabilized and the Turkish lira came off its recent lows. U.S. yields also rose for a second straight session after falling to four-week lows early on Monday. "The Treasury market is reacting to recovering global risk," said Gennadiy Goldberg, senior interest rates strategist at TD Securities in New York. "We're still watching Turkey as we don't expect things to get resolved overnight, so the market is cautious a little bit. It doesn't seem like Treasuries are wholeheartedly buying into that whole improvement story just yet," he added. In retaliation to trade moves by the United States, President Tayyip Erdogan said on Tuesday that Turkey would boycott electronic products from the United States. The announcement had little impact on the U.S. stock market, which traded higher on Tuesday. In Europe, bond markets were calmer as Germany's 10-year yields inched higher. Concerns about the exposure of European banks to Turkey had pushed up peripheral bond yields in recent days, but Italian, Spanish and Portuguese 10-year yields fell on Tuesday. "The general consensus in the U.S. Treasury market on Turkey is that there is limited impact for now unless there is some sort of broader contagion in the euro zone," said TD's Goldberg. "We will certainly follow core rates in Europe." In morning trading, U.S. 10-year yields were up at 2.884 percent, from 2.877 percent late on Monday. U.S. 30-year yields were also slightly higher at 3.048 percent from Monday's 3.045 percent. On the front end of the curve, U.S. 2-year yields inched up to 2.628 percent from 2.612 percent on Monday. Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee, said the retracement in U.S. yields since last Thursday has been less than 30 percent on the long end of the curve and about 40 percent in intermediates for U.S. Treasuries and high-grade European sovereigns. He added that if the long-end retracement reaches 50 percent by Wednesday, that would put 10-year Treasury yields at around 2.92 percent. A 75 percent retracement in U.S. 5-year yields would be at 2.79 percent. August 14 Tuesday 10:33AM New York / 1433 GMT Price US T BONDS SEP8 144-4/32 -0-6/32 10YR TNotes SEP8 120-36/256 -0-28/25 6 Price Current Net Yield % Change (bps) Three-month bills 2.035 2.0741 0.000 Six-month bills 2.18 2.2349 0.003 Two-year note 99-254/256 2.6288 0.017 Three-year note 100-32/256 2.7063 0.016 Five-year note 99-240/256 2.7634 0.017 Seven-year note 100-60/256 2.8375 0.018 10-year note 99-224/256 2.8895 0.012 30-year bond 98-244/256 3.0535 0.008 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 19.25 1.25 spread U.S. 3-year dollar swap 16.75 1.00 spread U.S. 5-year dollar swap 13.25 0.50 spread U.S. 10-year dollar swap 6.25 0.50 spread U.S. 30-year dollar swap -7.25 0.50 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)
