TREASURIES-Yields rise on Trump expectations, Fed's Kaplan comments
* Investors await Trump speech to joint session of Congress * Yields rise from at least two-week lows hit Friday * Fed's Kaplan says U.S. central bank might need to raise rates in near future (Updates prices, adds analyst comments) By Sam Forgione NEW YORK, Feb 27 (Reuters) - U.S. Treasury yields rose on Monday from multi-week lows touched Friday on expectations that a speech by U.S. President Donald Trump due on Tuesday could drive yields higher, while hawkish comments from a Federal Reserve official also contributed.
Analysts said investors were adjusting positions after growing bullish on Treasuries last Friday, when benchmark 10-year note yields slumped to 2.31 percent, their lowest in more than five weeks. Those yields rose to a session high of 2.370 percent on Monday.
Treasury Secretary Steven Mnuchin said on Sunday Trump would use a major policy speech to a joint session of Congress to preview some elements of his sweeping plans to cut taxes for the middle class, simplify the tax system and make U.S. companies more globally competitive, with lower rates and changes to encourage U.S. manufacturing.
Trump said on Monday he is seeking a "historic increase" in military spending to be funded by cuts elsewhere in government and that he would talk about his plans for infrastructure spending on Tuesday.
In addition, Dallas Fed President Robert Kaplan said Monday that the U.S. central bank might need to raise interest rates in the near future to avoid falling behind the curve on inflation.
“What the market reacted to was a combination of (Kaplan’s comments) with the fact that we might be getting signs that legislation may be sooner rather than later on things like tax reform and infrastructure, and that’s all very growth-positive," said Priya Misra, head of global rates strategy at TD Securities in New York.
Prices on federal funds futures for March delivery fell on Monday on record volume. They implied traders saw a 35 percent chance the Fed will raise rates at its March 14-15 meeting, up from 27 percent on Friday, according to CME Group's FedWatch program.
Benchmark 10-year notes were last down 13/32 in price to yield 2.363 percent, from a yield of 2.317 percent late Friday.
"When the big trade for 2017 is supposed to be reflation and higher growth, lower taxes and bigger infrastructure spending, people are loath to miss it, so you’re starting to see some weakness in the market in anticipation of that possibility," said John Briggs, head of strategy for the Americas at NatWest Markets.
February 27 Monday 3:55PM New York / 2055 GMT Price US T BONDS MAR7 152-23/32 -0-16/32 10YR TNotes MAR7 125-36/256 -0-120/2 56 Price Current Net Yield % Change (bps) Three-month bills 0.5025 0.5101 -0.005 Six-month bills 0.6725 0.6841 0.031 Two-year note 99-216/256 1.2043 0.059 Three-year note 99-196/256 1.456 0.065 Five-year note 100-10/256 1.8668 0.064 Seven-year note 99-164/256 2.1806 0.061 10-year note 98-252/256 2.365 0.048 30-year bond 100-88/256 2.9825 0.030 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 35.25 -2.50 spread U.S. 3-year dollar swap 28.50 -2.25 spread U.S. 5-year dollar swap 12.25 -0.25 spread U.S. 10-year dollar swap -2.50 0.25 spread U.S. 30-year dollar swap -38.25 0.25 spread (Reporting by Sam Forgione; Additional reporting by Richard Leong; Editing by Nick Zieminski and James Dalgleish)
