U.S. Treasuries sink after Fed Chair Yellen delivers upbeat economic outlook, signals rate hike

The U.S. Treasuries traded lower Monday after Federal Reserve Chair Janet Yellen, remained optimistic about the state of the economy, noting that the country’s underlying inflation will improve over time, which slain investors away from safe-haven instruments. Further, her comments suggested that the central bank will soon resume raising interest rates to reflect the strengthening economy.

The yield on the benchmark 10-year Treasury rose 1 basis point to 2.29 percent, the super-long 30-year bond yields range-bound at 2.81 percent and the yield on short-term 2-year note traded 1-1/2 basis points higher at 1.51 percent by 10:40GMT.

Federal Reserve Chair Janet Yellen on Sunday sketched a bright outlook for the U.S. economy and for inflation prospects in coming months, saying the impact of the recent hurricanes will likely slow economic growth slightly but only temporarily and should be followed by a rebound by year's end.

In the US the focus for much of the coming week will be on the industrial and housing sectors. As regards the former, most notably the September IP report is due tomorrow, while the October New York Fed and Philadelphia Fed manufacturing surveys are due today and Thursday respectively. As regards the latter, September housing starts and permits data are due on Wednesday, and September existing home sales follow on Friday.

The housing reports are almost certain to have been impacted by the recent storms, whilst supply chain disruptions may also show up in the factory surveys. Other key diary entries this week include Wednesday’s Fed Beige Book. But most notable will be a keynote speech to be delivered by Fed Chair Janet Yellen after the markets have closed on Friday. In the bond market, the Treasury will auction 30-year TIPS on Thursday.

Meanwhile, the S&P 500 Futures traded 0.04 percent higher at 2,553.88 by 10:55GMT, while at 10:00GMT, the FxWirePro's Hourly Dollar Strength Index remained neutral at -19.60 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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