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Yields on US Treasuries rise after sharp drop the day before

Apr 16 (Reuters) – U.S. Treasury yields rose on Friday, rebounding from multi-week lows hit in the previous session by a rally in prices fueled by purchases from Japan, hedging of short positions and other factors.

* The return on benchmark 10-year Treasury bonds rose 4.8 basis points to 1.5781%. On Thursday it fell more than 10 basis points, its biggest daily slide since November. Yields hit a low of 1.5280%, well below the 14-month high of 1.776% that they hit on March 30.

* “This is a volatile market. Yesterday there was definitely some Japanese buying and a lot of short hedging,” said Justin Lederer, Treasury analyst at Cantor Fitzgerald in New York. “Am I surprised we’re backing up? No. These are pretty strong moves during the session.”

* The increase in yields came as expectations of a strong global recovery were boosted by the latest economic data from China, which showed the country growing at a record rate of 18.3% in the first quarter.

* Thursday’s rebound in the price of Treasuries came despite strong US retail sales data and a larger-than-expected drop in initial jobless claims amid rising tensions between Moscow and Washington.

* “It is impossible to explain yesterday’s movements, perhaps it has something to do with safe haven purchases after the tensions between the United States and Russia,” said Chris Scicluna, head of economic research at Daiwa Capital Markets in London. “But the fact is, the higher yields drew buyers, especially from Asia.”

* Foreign Treasury sales reached their highest level since April 2020 in February, led by Japan – which was approaching the end of its fiscal year – according to US Treasury data released Thursday. Analysts have said they expect Japan to resume shopping in its new fiscal year, which began on April 1.

* The yield on two-year Treasury debt, which tends to move in line with interest rate expectations, rose less than one basis point to 0.1632%.

* The section of the yield curve that measures the gap between two-year and 10-year notes has risen less than one basis point since Thursday’s close, to 141.66 basis points.

* Next week, the Treasury Department will auction $ 24 billion in 20-year bonds on Wednesday and $ 18 billion in 5-year inflation-protected bonds on Thursday. The market breathed a sigh of relief after this week’s successful debt sales of $ 120 billion.

(Edited by Ricardo Figueroa)

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