Bonds News

TREASURIES-Benchmark U.S. yield falls below 1.5% for first time in a month

 (Updates with market activity, auction result, Fed facility
    By Ross Kerber
    June 9 (Reuters) - U.S. Treasury yields moved lower on
Wednesday for a second day as traders positioned for inflation
data due on Thursday and showed strong demand at an auction,
pushing the benchmark 10-year yield below 1.5% for
the first time since May 7.
    The yield on the 10-year note was down 3.4 basis points at
1.4941% in afternoon trading, after reaching as low as 1.472%
earlier in the session.
    The move also pulled down a closely watched part of the U.S.
Treasury yield curve measuring the gap between yields on two-
and 10-year notes, seen as an indicator of economic
expectations. It was at 134 basis points, about four basis
points lower than Tuesday's close.
    Bidding for an auction of 10-year notes just after 1 p.m. ET
was strong with a bid-to-cover ratio of 2.58 to 1, the highest
in a year, according to an investor note from DRW Trading market
strategist Lou Brien.
    Raymond James market strategist Ellis Phifer said investors
seemed to be taking sanguine stances before the next release of
consumer price index data by the U.S. Bureau of Labor Statistics
due on Thursday. Strong CPI data a month ago helped push the
yield on the 10-year to 1.707% in mid-May, but investors don't
seem so concerned about inflation now.
    "Inflation is higher but it doesn’t seem to be accelerating
at a pace that’s making the bond market nervous," Phifer said.
    A breakdown in talks in Washington on infrastructure
spending between U.S. President Joe Biden and a Republican
senator could also have contributed to the fall in yields,
Phifer said, since no deal or a later deal would mean less
future Treasury issuance.
    Booming demand as the U.S. economy reopens may continue to
push up inflation, but many economists expect the price surges
could be temporary.
    Helping drive the move lower in yields overnight was a big
buyer of ultra-long Treasury futures around 4 a.m. ET, said
Andrew Brenner, head of international fixed income at
NatAlliance Securities. The 10-year yield dipped from 1.52% to
around 1.50% on the purchase, said Brenner.
    The amount of money flowing into the U.S. Federal Reserve's
reverse repurchase facility was nearly $503 billion, the third
day in a row it hit a record high and putting pressure on
short-term interest rates.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down less
than a basis point at 0.1548%
    The 10-year TIPS yield was at -0.851% and the
breakeven inflation rate was at 2.342% after touching its lowest
since late April.
    June 9 Wednesday 1:15PM New York / 1715 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.025        0.0253    0.000
 Six-month bills               0.04         0.0406    0.003
 Two-year note                 99-241/256   0.1548    0.002
 Three-year note               99-208/256   0.3128    -0.013
 Five-year note                100-2/256    0.7484    -0.018
 Seven-year note               100-136/256  1.1704    -0.031
 10-year note                  101-52/256   1.4941    -0.034
 20-year bond                  102-112/256  2.0996    -0.031
 30-year bond                  104-104/256  2.1739    -0.035
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         6.50        -0.25    
 U.S. 3-year dollar swap         8.50        -2.25    
 U.S. 5-year dollar swap         6.75        -0.25    
 U.S. 10-year dollar swap       -3.25         0.00    
 U.S. 30-year dollar swap      -29.75        -0.50    
 spread (Reporting by Ross Kerber in Boston. Additional reporting by
Kate Duguid in New York;
Editing by Bernadette Baum, Emelia Sithole-Matarise and Jonathan