TREASURIES-Yields rise as U.S. growth in Q4 revised higher

* U.S. Q4 GDP growth 2.1 percent in final estimate

* Yield rise seen temporary
(Adds comment, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, March 30 U.S. Treasury debt yields
rose on Thursday after the final fourth-quarter U.S. gross
domestic product number was revised higher, reflecting steady
but less spectacular growth than in the prior quarter for the
world’s largest economy.

“We are positive on U.S. economic growth and underlying
fundamentals but we don’t see economic growth jumping to 3
percent,” said Chris Molumphy, chief investment officer at
Franklin Templeton’s fixed income group in San Francisco.

“And in that environment, we will have slightly higher
rates, but not significant.”

Yields have trended lower over the last two weeks, with that
of benchmark U.S. 10-year notes declining roughly 30 basis
points since hitting a three-month peak on March 14. Analysts
said the slight gain in Thursday’s yields, which move inversely
to prices, could be temporary.

Data showed that U.S. GDP grew 2.1 percent in the fourth
quarter, higher than the second estimate of 1.9 percent growth
and exceeding market forecasts for a 2.0 percent rise. The final
number, however, was less than the 3.5 percent rise in the third
quarter.

In late trading, benchmark 10-year notes fell
9/32 in price to yield 2.419 percent, compared with 2.387
percent late on Wednesday.

U.S. 30-year bond prices fell 24/32, yielding 3.031 percent
US30-YT=RR, up from Wednesday’s 2.994 percent.

On the front end of the curve, U.S. two-year note yields
were at 1.285 percent, up from 1.278 percent on
Wednesday.

Treasuries have been rising the last two weeks after the
Federal Reserve at its last policy meeting stuck to its forecast
for three interest rate increases this year.

More recently, growing doubts about the Trump
administration’s ability to get anything done to bolster the
economy have also pushed Treasury prices higher.

After Republicans on Friday withdrew their bill to replace
and repeal Obamacare due to lack of support in Congress, some
investors believe the next big reform, on taxes, could face
tough challenges as well.

Molumphy of Franklin Templeton said economy-boosting tax
reform had a good chance of being passed. “However, it’s likely
to be smaller in size than what the market is anticipating and
also further out into the future.”

Molumphy said the impact of tax reform on the economy would
probably not show up until 2018 or later.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci
and Richard Chang)

Source: Reuters

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