UK markets open in 1 hour 19 minutes

TREASURIES-U.S. yields up on strong bank earnings and economic data

By Ross Kerber

(Adds market activity, fixed income strategist comment) By Ross Kerber BOSTON, Jan 16 (Reuters) - U.S. Treasury yields rose on Thursday on positive economic data and bank earnings, and higher demand for stocks. The benchmark 10-year yield was up 2.1 basis points in afternoon trading at 1.8091%. U.S. equity indexes hit record highs on optimism over an initial U.S.-China trade deal and a positive start to the fourth-quarter earnings season. Equity buyers shifting out of debt were a factor in Thursday's trading, said Guy LeBas, chief fixed income strategist for Janney Montgomery Scott. "The risk-on theme courtesy of the equity markets is triggering a little selling" of bonds, driving up yields, he said. Other factors that boosted yields on Thursday included strong manufacturing data from the Mid-Atlantic region and better-than-expected retail sales, said Tom di Galoma, managing director of Seaport Global Holdings. "Certainly there's a little bit of pressure" for economic activity to continue to increase, he said. U.S. retail sales increased for a third straight month in December, with households buying a range of goods even as they cut back on purchases of motor vehicles, the Commerce Department said on Thursday. Other data showed the number of Americans filing claims for unemployment benefits dropped for a fifth straight week last week, indicating the labor market remained strong despite a slowdown in job growth. The Federal Reserve Bank of Philadelphia's business conditions index for the U.S. Mid-Atlantic region rose to 17.0 from an upwardly revised 2.4 in December. That easily topped expectations for a reading of 3.8 in January, according to a Reuters poll of economists. Morgan Stanley reported a 46% jump in quarterly profit and beat Wall Street estimates by a wide margin, the latest sign that Chief Executive James Gorman's strategic vision for the Wall Street bank is bearing fruit. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 1.5698% in afternoon trading. January 16 Thursday 2:23PM New York / 1923 GMT Price Current Net Yield % Change (bps) Three-month bills 1.5275 1.5589 -0.010 Six-month bills 1.525 1.5624 -0.011 Two-year note 100-27/256 1.5698 0.008 Three-year note 99-198/256 1.5778 0.011 Five-year note 100-152/256 1.6247 0.022 Seven-year note 100-24/256 1.7356 0.023 10-year note 99-120/256 1.8091 0.021 30-year bond 102-116/256 2.2614 0.019 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 6.75 -0.25 spread U.S. 3-year dollar swap 3.50 0.00 spread U.S. 5-year dollar swap 0.50 -0.50 spread U.S. 10-year dollar swap -4.75 -0.75 spread U.S. 30-year dollar swap -31.25 -0.75 spread (Reporting by Ross Kerber in Boston; Editing by David Gregorio and Grant McCool)