Dollar falls, U.S. yields rise, political fears ebb in…

By Caroline Valetkevitch

NEW YORK, June 4 (Reuters) – The dollar fell to a two-week low and Treasury yields climbed on Monday as political tensions in Europe eased, while Wall Street stocks gained with technology shares as investors bet on continued strong economic growth.

Italy’s anti-establishment parties formed a coalition government on Friday to end three months of deadlock.

Italian bond yields fell after soaring last week on fears a snap election would be called that might effectively become a referendum on euro membership.

The spread on Spanish bond yields over benchmark German Bunds also narrowed after a new prime minister was sworn in in Madrid, though Socialist Pedro Sanchez’s minority administration faces a tough baptism from a revived independence drive in Catalonia.

At the same time, U.S. Treasury yields rose, with the 10-year yield hitting one-week highs, as investors pared safe-haven holdings of lower-risk government debt amid reduced anxiety about the political turmoil in Italy and Spain.

Benchmark 10-year notes last fell 14/32 in price to yield 2.9442 percent compared with 2.895 percent late on Friday.

The dollar index fell 0.18 percent to 94.04, with the euro up 0.04 percent to $1.1703.

U.S. stocks rose, led by gains in technology shares. Strategists said Friday’s robust jobs data gave investors heightened confidence that the U.S. economy remained strong. The Nasdaq hit a record closing high, while the S&P technology index was up 0.8 percent.

“It’s kind of a reset from last week. The European situation improved. We saw our rates in the 10-year move up a little bit, which may be indicative of growth here in the U.S. relative to the rest of the world,” said Bucky Hellwig,

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