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Funds News

TREASURIES-U.S. yields rise as investors price in higher rates

    NEW YORK, June 28 (Reuters) - U.S. Treasury yields rose on
Tuesday, with the short end of the curve rising above the long
end, in anticipation of the Federal Reserve's plans to
aggressively raise interest rates to stamp out inflation.
    But the inflation outlook remains unresolved, leading many
investors to also see a sharp economic slowdown or recession as
the Fed's tightening makes loans too costly for many companies. 
    In a sign of the U.S. economy's tough road ahead, the
Conference Board's Expectations Index that shows consumers'
short-term outlook for income, business and labor market
conditions, fell  to its lowest level since March 2013.
    The index decreased sharply to 66.4 from 73.7. 
    "Most investors are accepting the fact that the economy is
going to have a hard landing," said David Petrosinelli, senior
trader at InspereX. "It's a continued lack of confidence in the
Fed being able to engineer it. People have accepted the fact the
Fed has to break demand before we can break prices."
    The yield on 10-year Treasury notes rose 3.2
basis points to 3.226%. The yield on two-year notes,
which can herald interest rate expectations, advanced 2.1 basis
points at 3.132%.
    Yields on three-, five- and seven-year notes were higher
than the benchmark 10-year, trading at 3.232%, 3.277% and
3.298%, respectfully.   
    The yield on the 30-year Treasury bond rose 3.3
basis points to 3.338%. 
    The Treasury will sell $40 billion of seven-year notes at 1
p.m. (1700 GMT). The auction of $93 billion in two- and
five-year notes on Monday was weak before the quarter ends on
Thursday.
    A closely watched part of the Treasury yield curve measuring
the gap between yields on two- and 10-year notes, a
sign of economic expectations, was at 9.2 basis points. The gap
earlier briefly spiked down to -7.24 when New York trade opened.
    The breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) was last at
2.803%.
    The 10-year TIPS breakeven rate was last at
2.529%, indicating the market sees inflation averaging about
2.6% a year for the next decade.
    The U.S. dollar five-year forward inflation-linked swap
 was last at 2.539%.

     June 28 Tuesday 10:33 AM New York / 1433 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.7475       1.7797    -0.013
 Six-month bills               2.4775       2.5439    -0.023
 Two-year note                 99-191/256   3.132     0.021
 Three-year note               99           3.2315    0.017
 Five-year note                99-224/256   3.2773    0.019
 Seven-year note               96-164/256   3.2966    0.029
 10-year note                  97-12/256    3.2263    0.032
 20-year bond                  95           3.6043    0.042
 30-year bond                  91-72/256    3.3383    0.033
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        32.75         1.50    
 spread                                               
 U.S. 3-year dollar swap        15.00         0.50    
 spread                                               
 U.S. 5-year dollar swap         3.25         0.75    
 spread                                               
 U.S. 10-year dollar swap        7.50         0.25    
 spread                                               
 U.S. 30-year dollar swap      -24.75         0.00    
 spread (Reporting by Herbert Lash; editing by David Evans)
  
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