TREASURIES-Yields hit high after firm retail sales

TOKYO, Dec 15 (BestGrowthStock) – The yield on 10-year U.S.
Treasuries hit a seven-month peak on Wednesday after strong U.S.
retail sales enhanced rising expectations of higher growth in
the United States, before slipping on short-covering.

Some market players appeared to have bought back bonds after
the 10-year yield hit the psychological 3.50 percent mark, said
a fund manger at a U.S. asset management firm.

A number of traders said position unwinding ahead of
end-of-year book closing for many participants is driving the
market, with thin trade exaggerating price movements.

The 10-year yield rose above 3.50 percent (US10YT=RR: ), its
highest level since mid-May, having climbed about 70 basis
points so far this month, before slipping back to around 3.45
percent, down 2 basis points on the day.

Yields on five and seven-year bonds, which have been under
the heaviest pressure in the sell-off, also hit new highs.

Stronger-than-expected U.S. retail sales data on Tuesday
added to expectations that the economy would grow at a faster
pace next year, pushing up the 10-year yield by 18 basis points.

A statement from the Federal Reserve on Tuesday, which
offered only a cautious nod to the economy’s improving prospects
and reaffirmed its commitment to buy $600 billion in bonds, was
largely in line with market expectations, traders said.

The yield curve remained near its steepest in eight months,
with the 2-10 year yield spread at 282 basis points, gaining
about 60 basis points since the Fed announced its $600 billion
bond purchase programme in early November.

“I still think the situation with the labour market and
prices has not changed in the United States, so recent moves in
the Treasury market are a bit overdone. Treasuries look
attractive from the prospect of the widening short- and
long-term yield spreads,” said Junko Ikeda, chief bond fund
manager at Sumitomo Trust Bank Asset Management.


Still, the market lacks investors with the risk appetite to
capitalise on the steepened curve, as many players do not want
to risk making fresh losses ahead of their book closings.

And the limited number that may have been ready to take
risks were likely to have been burned by buying Treasuries
prematurely earlier this month, traders said.

“The market is being driven by the dumping of long positions
ahead of book closing. So it’s hard to pinpoint exactly when and
where this selloff will end,” said a trader at a Japanese bank.

Some analysts think the Fed’s bond purchases and a lack of
Treasury supply in coming weeks could help stem the selloff.

But many traders suspect they will have to wait until market
volume recovers after the year-end holiday period.
(Reporting by Hideyuki Sano; Editing by Joseph Radford)

TREASURIES-Yields hit high after firm retail sales