By Sunny Oh

Improvement in consumer confidence index sinks Treasurys

Treasury prices fell, pushing yields from the lowest level in a month, Tuesday as better-than-expected economic data raised inflation expectations, dulling appetite for government bonds.

The yield on the 10-year Treasury note rose 3.8 basis points to 2.411%, ending a two session skid for yields, which hit the lowest level since Feb. 28 (http://www.marketwatch.com/story/treasury-yields-fall-to-1-month-low-as-trumps-agenda-seen-faltering-2017-03-27) on Monday. The yield on the two-year note was up 4.5 basis points to 1.298%, the largest one-day bump since March 1, according to Dow Jones data.

Meanwhile, the yield on the 30-year bond was , known as the long bond, was up 3.4 basis points at 3.013%.

Yields move inversely with prices and one basis point is equal to a hundredth of a percentage point.

Attracting the most attention for Treasury traders on the day was a March reading of consumer-confidence (http://www.marketwatch.com/story/consumer-confidence-soars-in-march-to-best-reading-in-16-years-2017-03-28), which soared to the highest level in more than 16 years, helping to reinvigorate trades considered risky and tempering recent healthy demand for the perceived safety of government paper.

"What's happened here is consumers seem to be in a good spot," said Tom di Galoma, managing director for Treasury trading at Seaport Global. "I think the bond market is due to explore higher yields here, at least for the near term," he said.

The economic report comes as Federal Reserve Vice Chairman Stanley Fischer, during a CNBC interview Tuesday afternoon forecast two additional rate increases for 2017 (http://www.marketwatch.com/story/feds-fischer-forecasts-two-more-interest-rate-hikes-this-year-2017-03-28), and offered a fairly upbeat outlook for the U.S. economy.

"Perhaps most importantly is that job prospects continue to improve," Jennifer Lee, senior economist for BMO Capital Markets, wrote in a note.

In other economic data, U.S. house prices roared to their highest in nearly three years as demand remains hot, with the S&P/Case-Shiller 20-city index rising 5.7% (http://www.marketwatch.com/story/home-prices-hit-a-31-month-high-in-january-case-shiller-says-2017-03-28) in the three-month period ended in January.

Tuesday's Treasury moves follow growing doubts about President Donald Trump's ability to implement a roster of pro-growth and inflation-stoking policies following sparked by his failure to repeal and replace the Affordable Care Act, known as Obamacare.

Against that backdrop, government bond yields had been declining, as investors bought Treasurys, amid the diminished threat of inflations corrosive effect on bonds' fixed payments.

On Tuesday, however, the yield decline abated as optimistic economic reports and revived appetite for risk assets, like stocks, combined to dull the demand for haven assets like Treasurys and gold .

Treasury yields had been rising steadily postelection, with the 10-year note hitting a recent peak of 2.6% mid-December, as investors bet the new Trump administration could quickly push forward tax reforms and other fiscal policies with a Republican majority in both the House and the Senate.

Among other Fed speakers, Fed Chairwoman Janet Yellen, Dallas Fed President Rob Kaplan, and Kansas City Fed President Esther George all spoke on Tuesday, but their remarks didn't significantly influence trade, market participants said.

Meanwhile, an auction of $34 billion in five-year Treasury notes received "average" demand, according to investment bank Jefferies Group LLC. Treasury auction results can influence yields for the outstanding market for Treasurys.

 

(END) Dow Jones Newswires

March 28, 2017 17:38 ET (21:38 GMT)

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