Bonds News

TREASURIES-Benchmark U.S. yields decline for third straight day

 (Adds Fed comments, BNPP outlook)
    By Chuck Mikolajczak
    NEW YORK, March 2 (Reuters) - Benchmark U.S. yields dipped
on Tuesday for a third straight day after jumping to a one-year
high last week, as comments from two Federal Reserve officials
failed to spark a move higher while investors look for a pickup
in economic data later this week.
    In prepared comments, Federal Reserve Board Governor Lael
Brainard said that while the U.S. economic outlook has markedly
improved, the central bank "will need to be patient" before
thinking about policy changes. However, Brainard also noted she
is "closely watching the bond market" and would be concerned if
the rise in yields continued.
    Federal Reserve Bank of San Francisco President Mary Daly
preached patience amid concerns Fed policy could bring about
unwanted inflation, arguing that pricing pressures are currently
too low and with a large number of Americans still out of work,
the Fed must maintain its accommodative stance "for some time."

    Fed officials in recent days have largely been in sync in
their comments that they do not see inflation becoming
problematic, after Chair Jerome Powell indicated last week the
central bank will remain accommodative until inflation has
exceeded 2%.
    "Back in August they made a major transitional shift in the
nature of monetary policy and it wasn’t fully appreciated at the
time, and people are slowly coming around to understanding this
Fed is really, really focused on this concept of maximum
employment because they sense the global deflationary
pressures," said Steven Ricchiuto, U.S. chief economist at
Mizuho Securities USA LLC in New York.
    "And they have opted to go the route that the best defense
against global deflation is a little more domestic inflation,
therefore they are going to allow it to run hot." 
    The yield on 10-year Treasury notes was down 3.6
basis points to 1.410%. The yield is down about 20 basis points
since jumping to 1.614% last week in the wake of a poor 7-year
auction and as expectations increased that the economy was
improving, sparking inflation concerns. 
    Investors will also have a raft of economic data to digest
shortly, with reports on the labor market in each of the next
three days, culminating in Friday's payrolls report for
February. Also expected is a report on the health of the
services sector for February and January factory orders. 
    Stronger than anticipated data could once again fuel
inflation worries, which could lead to another test of the 1.50%
level on the 10-year.   
    "An economic recovery super-charged by faster vaccination
and fiscal stimulus does increase the likelihood of an
accelerated schedule for both asset purchases and rate hikes,"
said BNP Paribas analysts in a note on Tuesday. "But at present,
the Fed will likely reiterate that it is too early to declare
victory and that it would communicate any potential moves with
plenty of advance warning."   
    The yield on 30-year Treasury bond was down 1.2
basis points to 2.209%.     

  March 2 Tuesday 2:59PM New York / 1959 GMT
 US T BONDS JUN1               159-18/32    0-12/32   
 10YR TNotes JUN1              133-148/256  0-100/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.04         0.0406    0.000
 Six-month bills               0.06         0.0609    0.000
 Two-year note                 100-2/256    0.1211    -0.002
 Three-year note               99-160/256   0.2524    -0.016
 Five-year note                99-40/256    0.6721    -0.039
 Seven-year note               100-82/256   1.0773    -0.046
 10-year note                  97-92/256    1.4102    -0.036
 30-year bond                  92-180/256   2.2093    -0.012
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         9.75        -0.25    
 U.S. 3-year dollar swap        12.00         0.00    
 U.S. 5-year dollar swap        11.50         0.25    
 U.S. 10-year dollar swap        6.50        -0.75    
 U.S. 30-year dollar swap      -26.75        -0.50    


 (Reporting by Chuck Mikolajczak
Editing by Mark Heinrich and Sonya Hepinstall)