TREASURIES-Yields edge higher after solid U.S. data
By Gertrude Chavez-Dreyfuss NEW YORK, Nov 30 (Reuters) - U.S. Treasury yields drifted higher on Thursday after U.S. data showed a rise in inflation and a decline in initial jobless claims, reinforcing expectations of an interest rate increase next month and several more in 2018.
Yields on U.S. 10-year and 30-year Treasuries climbed to two-week peaks amid a generally healthy risk appetite, with most global equity markets trading higher. Those gains held up following the release of U.S. data.
The Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, rose 0.2 percent in October after a similar gain in September. The so-called core PCE increased 1.4 percent in the 12 months through October, matching September's rise.
U.S. consumer spending, however, slowed in October.
Jim Vogel, interest rates strategist at FTN Financial in Memphis, said the market was focused on inflation and not really looking at consumer spending.
"Today's inflation data was enough to let bond yields drift back up to the highs at the long end of the curve," Vogel said.
"A lot of people have moved their forecasts to four rate hikes next year, from three. But the people who are skeptical about the four hikes in 2018 and who saw the data this morning may be thinking that is not totally out of bounds," he added.
The Fed is widely expected to raise rates at next month's monetary policy meeting and has forecast three more rate hikes next year.
U.S. initial jobless claims slipped to a seasonally adjusted 238,000 for the week ended Nov. 25. Last week marked the 143rd straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market.
U.S. yields had briefly inched lower after a Chicago manufacturing index fell to 63.9 in November from 66.2 the previous month. Last month's reading was the highest since March 2011.
In late morning trading, the 10-year Treasury yield was up at 2.386 percent, from 2.376 percent late on Wednesday. It hit a two-week high of 2.401 percent earlier in the session.
U.S. two-year yields, which hit a nine-year peak last week, were at 1.766 percent from 1.762 percent on Wednesday. Two-year notes are the maturity most sensitive to rate hike expectations.
U.S. 30-year bond yields were up at 2.826 percent from Wednesday's 2.817 percent. Earlier, 30-year yields hit a two-week high of 2.844 percent.
November 30 Thursday 10:44AM New York / 1544 GMT Price US T BONDS DEC7 153-2/32 -0-8/32 10YR TNotes DEC7 124-148/256 -0-36/25 6 Price Current Net Yield % Change (bps) Three-month bills 1.2675 1.2892 0.000 Six-month bills 1.415 1.4449 -0.008 Two-year note 99-248/256 1.766 0.004 Three-year note 99-166/256 1.8727 0.014 Five-year note 99-124/256 2.1092 0.016 Seven-year note 98-248/256 2.2853 0.017 10-year note 98-200/256 2.3882 0.012 30-year bond 98-120/256 2.8261 0.009 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 18.75 1.00 spread U.S. 3-year dollar swap 18.25 0.50 spread U.S. 5-year dollar swap 6.50 0.25 spread U.S. 10-year dollar swap -0.50 0.75 spread U.S. 30-year dollar swap -23.50 0.25 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith Mazzilli)
