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Bonds News

REFILE-TREASURIES-Treasuries slip after Yellen says tax cuts should be repealed

 (Refiling to fix typographical error in 10th paragraph to make
it "bank for the buck" instead of "bank for the buck")
    By Herbert Lash
    NEW YORK, Jan 19 (Reuters) - U.S. Treasury yields fell
slightly on Tuesday after U.S. Treasury secretary nominee Janet
Yellen said during Senate confirmation testimony that  tax cuts
enacted in 2017 for large corporations should be repealed.
    Yellen advocated the need for hefty fiscal spending in her
Senate Finance Committee testimony but also said it is necessary
for U.S. companies to be competitive globally.
    Earlier, breakeven interest rates on U.S. 10-year TIPS
, which measure expected annual inflation for the
next 10 years, rose to a more than a two-year high of 2.11% on
Tuesday, from 2.089% on Friday.
    Rates at the long end have been rising on expectations of
rising inflation.
    "Generally people expect inflation to be on the upswing
here. You see that in inflation expectations, which are trending
higher," said Stan Shipley, macro research analyst at Evercore
ISI in New York. 
    Crude oil, many industrial commodity prices, both tradeable
and non-tradeable like plastics, are on the rise, Shipley said.
When spending plans by the incoming administration of Democratic
President-elect Joe Biden are added, higher rates are likely
this year, he said.
    "There will be a push by the Biden administration to try to
get wage gains to accelerate too," he said.
    Benchmark 10-year yields US10YT-RR traded flat at 1.097%,
falling from earlier gains. The benchmark rate closed at 1.085%
on Friday before the long U.S. weekend, with markets closed for
Martin Luther King Jr. Day on Monday. 
    Rates two weeks ago jumped above 1% for the first time since
March and have trended higher since.
    Yellen told the Senate committee that extended unemployment
and food aid will provide the "biggest bang for the buck" in
stimulus spending. The core focus will be the needs of workers
in cities and rural areas, she said.
    Yellen had been expected to urge lawmakers in her testimony
to "act big" on the next coronavirus relief package, adding that
the benefits outweigh the costs of a higher debt burden.

    Yields jumped last week ahead of Biden's announcement of
plans for a $1.9 trillion fiscal package on hopes the stimulus
will jump-start a weakened U.S. economy and accelerate the
distribution of vaccines to bring the coronavirus under control.
    Federal Reserve officials have talked down market
speculation that the U.S. central bank would pull back, or
taper, its bond-buying program.
    The yield curve between two-year and 10-year notes
 rose slightly to 96.40 basis points.
    
  January 19 Tuesday 11:44AM New York / 1644 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.08         0.0811    0.000
 Six-month bills               0.09         0.0913    0.000
 Two-year note                 99-251/256   0.135     -0.002
 Three-year note               99-194/256   0.2064    -0.003
 Five-year note                99-154/256   0.4566    0.002
 Seven-year note               98-244/256   0.7802    0.000
 10-year note                  97-240/256   1.0971    0.000
 20-year bond                  95-120/256   1.6438    -0.008
 30-year bond                  95-16/256    1.8409    -0.011
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.00         0.25    
 spread                                               
 U.S. 3-year dollar swap         6.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         7.00        -0.25    
 spread                                               
 U.S. 10-year dollar swap        0.00        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -26.00        -0.50    
 spread (Reporting by Herbert Lash; editing by Jonathan Oatis)
  
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