U.S. yields rise to multi-week highs on fading trade tensions, data
U.S. retail sales rise more than expected
China exempts some U.S. goods from additional tariffs
Highest weekly rise since June 2013 for 10-year yields
Biggest weekly increase since Nov 2016 for 30-year yields
Largest weekly gain since June 2009 for U.S. 2-year yield
U.S. curve steepens, gap widest in four weeks
Adds new comment, updates prices
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 13 (Reuters) - U.S. Treasury yields climbed to multi-week peaks on Friday, as trade tensions between the United States and China eased further after more conciliatory measures, with U.S. recession risks continuing to diminish after stronger-than-expected retail sales data.
U.S. yields rose for five straight sessions.
Yields on U.S. benchmark 10-year notes and 2-year notes hit six-week highs, while those on 30-year bonds hit five-week peaks. The 10-year yield posted its largest weekly rise since June 2013, while the 30-year yields had their biggest weekly increase since U.S. President Donald Trump's election in November 2016.
On the short end of the curve, the U.S. 2-year yield had its highest weekly increase since June 2009.
After inverting in August, the U.S. yield curve steepened a bit more on Friday, a sign that recession worries are abating. The spread between U.S. 2-year note and 10-year note yields widened to as much as nearly 11 basis points US2US10=TWEB, the steepest curve in four weeks.
"We have the continued warming of relationships over the trade talks. And we have the consumer still strong with retail sales, and those two just added fuel to the fire," said Ellis Phifer, market strategist at Raymond James in Memphis, Tennessee.
"Have we turned the corner on (interest) rates? I don't know if it's a complete turn. We have had a reversal for now, but we have trade talks coming up and we have the Federal Reserve meeting coming up. There is a lot of potential news that could turn us back around."
On Friday, China's official Xinhua News Agency reported that Beijing will exempt some agricultural products from additional tariffs on U.S. goods. The United States and China have both made amicable gestures, with China renewing purchases of U.S. farm goods and Trump delaying a tariff increase on certain Chinese goods.
On the data front, U.S. retail sales increased more than expected in August, rising 0.4%, lifted by spending on motor vehicles, building materials, healthcare and hobbies. The consensus forecast was for a 0.2% gain in August.
Excluding automobiles, gasoline, building materials and food services, retail sales climbed 0.3% last month.
In afternoon trading, U.S. benchmark 10-year note yields US10YT=RR rose to 1.901% from 1.791% late on Thursday, hitting a six-week high of 1.903%.
Yields on 30-year bonds were also higher at 2.373% US30YT=RR from 2.264% on Thursday, touching a five-week high of 2.378%.
U.S. 2-year yields, on the other hand, hit a six-week peak of 1.802%. They were last up at 1.799% US2YT=RR, from Thursday's 1.727%.
"We had quite a run after the July Fed meeting, and yields fell precipitously," said Lou Brien, market strategist at DRW Trading in Chicago. "So sometimes it's like water in a bathtub where water splashes up against one side and then inevitably splashes against the other."
September 13 Friday 3:14PM New York / 1914 GMT
Price
Current Yield %
Net Change (bps)
Three-month bills US3MT=RR
1.9225
1.9637
0.008
Six-month bills US6MT=RR
1.87
1.9189
0.021
Two-year note US2YT=RR
99-108/256
1.802
0.075
Three-year note US3YT=RR
99-60/256
1.7634
0.091
Five-year note US5YT=RR
97-160/256
1.7524
0.101
Seven-year note US7YT=RR
97-8/256
1.8315
0.104
10-year note US10YT=RR
97-140/256
1.8976
0.107
30-year bond US30YT=RR
97-116/256
2.3693
0.105
DOLLAR SWAP SPREADS
Last (bps)
Net Change (bps)
U.S. 2-year dollar swap spread
-1.75
0.00
U.S. 3-year dollar swap spread
-4.75
-0.50
U.S. 5-year dollar swap spread
-6.50
0.25
U.S. 10-year dollar swap spread
-11.50
0.50
U.S. 30-year dollar swap spread
-41.50
1.00
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Kevin Liffey, Steven Orlofsky and Jonathan Oatis)
((gertrude.chavez@thomsonreuters.com; 646-223-6322; Reuters Messaging: gertrude.chavez.reuters.com@reuters.net))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
