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Bonds News

TREASURIES-10-year yields jumps back above 1.50% as inflation rises

 (Adds more details of yield curve)
    By David Randall
    NEW YORK, June 25 (Reuters) - The yield of the benchmark
10-year Treasury jumped above 1.50% Friday to close out a week
in which yields notched their largest weekly gains since March. 
    The moves higher came after the Federal Reserve's main
inflation reading rose 3.45%, the most in 29 years, as supply
constraints and increased demand for services helped lift prices
in May. Overall, consumer spending remained flat last month,
following an upwardly revised 0.9% jump in April.
    The pace of inflation will not likely be enough to prompt
the Fed to deviate from its plan to raise interest rates twice
in 2023 or to begin tapering its support of the bond market,
analysts said. 
    Bond yields fell sharply last week after the Fed's hawkish
tone at its policy meeting surprised many investors. 
   "We don't believe that this data will impact the Fed's
current plans for reducing extraordinary stimulus and rate
hikes," said Chris Zaccarelli, chief investment officer at
Independent Advisor Alliance. "They haven't publicized their
plans explicitly, but between the most recent Dot Plot and Fed
speeches, they have shown interest in beginning a tapering plan
in the next 6-12 months." 
    The yield curve - a measure of expectations of future
economic growth - steepened slightly, with the spread between 5-
and 30-year Treasury yields edging up to 123.80 basis points
from 118.60 the day before. The spread between 10-year and
30-year Treasury yields, meanwhile, had its largest weekly gain
since August, following the worst weekly loss since November
2016.
    "Today's inflation data was another vote of confidence for
the inflation is transitory camp," said Edward Moya 
senior market analyst, The Americas, at OANDA. 
    Treasury yields are likely to trade in a tight trading range
given that "we see no obvious trigger on the horizon that would
warrant another repricing ahead of next week's employment
report," said Ian Lyngen, head of U.S. Rates Strategy at BMO
Capital Markets.
    Benchmark 10-year Treasury yields rose to 1.5377%, while
shorter-term 2-year Treasury yields edged up to 0.4812%. Long
duration 30-year Treasury yields rose to 2.1723%. 
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0525       0.0532    0.000
 Six-month bills               0.055        0.0558    0.000
 Two-year note                 99-182/256   0.27      0.002
 Three-year note               99-82/256    0.4812    0.008
 Five-year note                99-186/256   0.9311    0.024
 Seven-year note               99-180/256   1.2945    0.038
 10-year note                  100-204/256  1.5377    0.051
 20-year bond                  102-108/256  2.1003    0.073
 30-year bond                  104-112/256  2.1723    0.077
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.75         0.00    
 spread                                               
 U.S. 3-year dollar swap        10.00         0.25    
 spread                                               
 U.S. 5-year dollar swap         5.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -4.25        -1.25    
 spread                                               
 U.S. 30-year dollar swap      -33.00        -1.50    
 spread (Reporting by David Randall; editing by Jonathan Oatis)
  
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