TREASURIES-U.S.

yields rise
before 30-year bond sale
Reuters Staff
5 MIN READ

* U.S. to sell $12 billion 30-year bond at 1 p.m.

* Producer prices post biggest annual rise in nearly 6 years
* Two-year yield touches highest level since October 2008

(Recasts; updates prices, adds comment, table)

By Richard Leong
NEW YORK, Dec 12 (Reuters) - U.S. Treasury yields rose on
Tuesday as investors reduced their debt holdings in advance of a
$12 billion auction of 30-year government bonds and after
stronger-than-forecast data on producer prices in November.
The two-year yield reached its highest level in more than
nine years as traders anticipated an interest rate increase from
the Federal Reserve at its two-day policy meeting that ends on
Wednesday.
"The focus for the market right now will be on the data and
the Fed," said Subadra Rajappa, head of U.S. rates strategy at
SG Corporate & Investment Banking in New York.
Earlier on Tuesday, the U.S. government said producer prices
rose at a 12-month clip of 3.1 percent, the largest such gain
since January 2012, supporting the view of a broad pickup in
inflation.
Stubbornly low inflation has kept the Fed on a gradual path
in increasing borrowing costs and reducing its balance sheet.
Investors awaited November figures on consumer prices, which
are due at 8:30 a.m. (1330 GMT) on Wednesday, for confirmation
that inflation is accelerating.
In the meantime, the Treasury will sell $12 billion worth of
30-year bonds at 1 p.m. (1800 GMT) following mixed reception to
three-year and 10-year notes on Monday.
Some investors would like to see higher yields on the latest
30-year supply, which was quoted at about 2.79 percent in the
"when issued" market.
"We need a bit of concession for the 30-year," Rajappa said.
"Given the recent demand for long-duration assets, it might
still go okay."
 At 10:33 a.m. (1533 GMT), the 10-year Treasury yield
was 2.410 percent, up 3 basis points from late on
Monday, while the 30-year yield rose 3 basis points
to 2.800 percent.
Two-year yields were up more than 2 basis points
at 1.847 percent, which was the highest since October 2008,
Reuters data showed.
December 12 Tuesday 10:39AM New York / 1539 GMT

Dollar gains as Fed seen set

to raise rates
Karen Brettell
3 MIN READ

NEW YORK (Reuters) - The U.S. dollar rose to three-week highs

against a basket of currencies on Tuesday as the Federal Reserve
begins a two-day policy meeting where it is widely expected to raise
interest rates for the fifth time since 2015.

FILE PHOTO - A U.S. Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas
White/Illustration/File Photo

Investors will be watching for any signals that Fed officials are more
optimistic on the prospect of faster growth as lawmakers appear close
to passing a large overhaul of the tax code.

SPONSORED

People are looking for a little more confidence on the fact that tax
legislation is set to pass, Sireen Harajli, a foreign exchange strategist
at Mizuho in New York. The general theme is that the dollar will
continue to find support as we approach the end of the year.

The dollar index gained to 94.10, the highest since Nov. 21. The
greenback rose more than 1 percent last week, its biggest weekly rise
since the end of October, but is down around 8 percent this year.

ADVERTISING
Investors will also be watching the Feds statement at the conclusion
of the meeting on Wednesday for concern about low inflation.

Fed forecasters expect three additional rate hikes next year though
bond markets see two as more likely.

Deflationary risks generally around the world are slowly receding

and probably further in the rear view mirror these days than at the start
of the year, said Shaun Osborne, chief FX strategist at Scotiabank in
Toronto. Global central banks seem to be more optimistic about the
outlook.

U.S. producer price data on Tuesday showed an increase in wholesale

inflation, increasing hopes that price pressures may be rising from
sluggish levels.

The Labor Department said its producer price index for final demand
increased 0.4 percent last month.

In the 12 months through November, the PPI shot up 3.1 percent. That
was the biggest gain since January 2012 and followed a 2.8 percent
rise in October.

Consumer Price Index (CPI) data on Wednesday will be a key data

focus for further clues on price pressures.

The New Zealand dollar set a one-month high as investors welcomed

the appointment of national pension fund chief Adrian Orr to head the
Reserve Bank from March.

The kiwi was last up 0.41 percent against the U.S. dollar at $0.69.