TREASURIES-US yields climb as market look to Fed's Powell's speech for rate clues

By Matt Tracy

WASHINGTON, Aug 21 (Reuters) - Yields on U.S. Treasuries rose on Thursday following upticks in weekly jobless claims and existing home sales, ahead of widely anticipated remarks by Federal Reserve Chair Fed Powell on Friday.

The benchmark U.S. 10-year note yield US10YT=RR rose 4.7 basis points from late Wednesday to 4.343%.

The two-year note yield US2YT=RR, which typically moves in step with interest rate expectations, was last 4.8 bps higher at 3.8%.

Yields briefly slipped Wednesday afternoon after minutes of the Fed's July meeting showed that the two policymakers who dissented against the central bank's decision to leave interest rates unchanged last month appeared not to have been joined by their colleagues.

The main market mover this week is the Fed's annual meeting in Jackson Hole, Wyoming, which kicks off on Thursday. Bond investors will closely watch Friday's speech by Chair Powell, which is expected to signal the Fed's near-term course on interest rates.

"We expect this year's Jackson Hole meeting to offer an opportunity for Powell to again nod towards monetary easing," Andrzej Skiba, head of the Bluebay U.S. fixed income team at RBC Global Asset Management, said in an emailed statement.

"While there are some hot spots in this month's inflation reading, it's probably not enough to deter the doves on the committee."

Fed funds futures, which are tied to the U.S. central bank's monetary policy, have priced in a 72% chance of easing in September, according to the CME's FedWatch. This compares with 83% on Wednesday and 92% a week ago.

The market has put odds on about 48 bps in easing this year and a total of 123 bps in rate declines by the end of 2026, LSEG calculations show.

The decline in rate cut chances has helped boost yields overall.

Thursday's higher yields were in place despite data showing weakness in the U.S. economy. One new report showed the highest increase in the number of Americans filing for new jobless claims since late May. They rose by 11,000.

Meanwhile, the Philadelphia manufacturing survey, a gauge of manufacturing activity in the U.S. Mid-Atlantic region, slid overall with new orders and shipments both erasing their gains from last month.

A separate report also showed July sales of existing U.S. homes unexpectedly ticked higher, yet the pace remained sluggish due to high house prices and mortgage rates.

"Overall, it was a disappointing round of data that has contributed to a modest firming in Treasuries, although the implications for the near-term monetary policy outlook are limited," said Vail Hartman, analyst on the U.S. rates strategy team at BMO Capital Markets, in a written note.

The closely watched gap between yields on two- and 10-year Treasury notes US2US10=TWEB, considered a gauge of growth expectations, was at 54.1 bps and virtually unchanged from Wednesday's level. The curve has steepened recently as the market expects the Fed to resume its cutting cycle next month.

In addition, the U.S. Treasury Department held auctions for $100 billion in four-week bills and $85 billion in eight-week bills on Thursday, which were each between two and three times oversubscribed.

Treasury also announced six-, 13- and 26-week bills. It also announced auctions next week for $69 billion in two-year notes, $28 billion in two-year TIPS, $70 billion in five-year notes, and $44 billion in seven-year notes.