* Pressure rises on U.S. bonds
* World stocks add to recent gains
* Dollar stronger, euro slips
By Jeremy Gaunt, European Investment Correspondent
LONDON, Dec 13 (Reuters) - Selling pressure on 10-year U.S.
Treasuries drove yields to fresh six-month highs on Monday as
investors threatened to undo this year's bond rally on signs of
global economic recovery and deeper U.S. deficits.
World shares climbed with gains in Japan and Europe, adding
to an end-of-year rally.
The dollar rose against a basket of major currencies <.DXY>,
lifted by prospects for higher returns on U.S. assets.
U.S. Treasury yields <US10YT=TWEB> were up around 5 basis
points to more than 3.37 percent, levels not seen for six
months. They shot up as much as 20 basis points last Wednesday
alone on a combination of expectations about an improving U.S.
economic climate and worries about an increased fiscal deficit
due to proposed extensions of tax cuts.
Investors have also begun reappraising the likelihood of
further bond-buying by the U.S. Federal Reserve after the
current $600 billion quantitative easing programme is completed.
Monday's selling appeared to be spreading to short-term U.S.
papers, suggesting investors are also pricing in raised
expectations of higher interest rates next year.
"If the market really thinks there will be a rate hike
within a year, then the two-year yield could rise near 1
percent," said Tomoaki Shishido, a fixed-income analyst at
Nomura Securities in Tokyo.
The two-year note <US2YT=TWEB> was yielding 0.67 percent, up
three basis points.
Wariness about holding low-yielding government debt also
spread into Europe, where the 10-year Bund <DE10YT=TWEB> yield
was up three basis points at 2.98 percent.
FX AND STOCKS
European bond trading is complicated by the euro zone debt
crisis, which will be the main subject later in the week of an
EU summit seeking some way of stabilising pressure on the debt
of peripheral economies.
The euro was again a victim of the concern, falling a
quarter of a percent to just under $1.32 (EUR=>. The single
currency was also under pressure from expectations of higher
yields, and thus returns, from U.S. assets.
Currency speculators trimmed short positions against the
dollar last week but more than doubled their bets against the
euro, according to data from the Commodity Futures Trading
Commission, signalling growing bearishness on the currency.
[]
On stock markets, meanwhile, investors were cautiously
building up gains before the Christmas/New Year break.
MSCI's all-country world stock index was up 0.1 percent for
a more than 8 percent year-to-date gain <.MIWD00000PUS>.
Europe's FTSEurofirst 300 <> gained 0.2 percent and
Japan's Nikkei <> closed up 0.8 percent.
"Market sentiment is bullish because of strong economic data
and some positive policy announcements in the United States in
the past weeks," said Koen De Leus, strategist at KBC
Securities, in Brussels.
(Additional reporting by Atul Prakash; Editing by John
Stonestreet)
