Bonds News

TREASURIES-Yields drift higher ahead of retail sales, jobless claims data

 (Recasts; updates yields, adds analyst comments)
    By Karen Pierog
    CHICAGO, April 14 (Reuters) - U.S. Treasury yields edged
higher and the yield curve steepened on Wednesday as the market
awaited Thursday's release of weekly jobless claims and March
retail sales data for further clues on the economy's recovery
from the coronavirus pandemic.
    The benchmark 10-year yield was last up 1.3
basis points at 1.6359%, holding below a 14-month high of 1.776%
reached on March 30. 
    The rise in yields followed Tuesday's tumble in the wake of
a strong 30-year bond auction.
    Michael Lorizio, senior fixed income trader at Manulife
Investment Management in Boston, said, "It makes sense to see
some give-back after this strength that we've seen basically
across the entire curve" in the face of better-than-expected
economic data and $120 billion in bond and note supply that hit
the market in auctions this week. 
    On Thursday, the market will weigh the latest weekly initial
jobless claims, which are expected to fall to 700,000 for the
week ended April 10 from 744,000 in the prior week. Also on tap
is a U.S. Commerce Department report on retail sales, which is
expected to show a 5.9% jump in March after falling 3% in
February, according to a Reuters poll.
    "If retail sales beats the upside it would make intuitive
sense it should be a bearish influence on U.S. Treasuries for
sure, but I think there's expectations for this accelerating
economy that much of the market is already positioned for to
some degree," Lorizio said.
    Meanwhile, yields were largely unmoved by comments from
Federal Reserve Chair Jerome Powell and other central bank
officials on Wednesday.
    In remarks to the Economic Club of Washington, Powell
clarified the order of monetary policy changes still months if
not years away, saying the Fed will reduce its monthly bond
purchases before it commits to an interest rate increase.

    Dallas Federal Reserve Bank President Robert Kaplan said the
central bank should reduce its "extraordinary measures ... at
the first opportunity once we've reached, and are reaching, some
of these benchmarks." Those include the weathering of the
pandemic and progress toward full employment and 2% inflation.

    As for inflation, New York Fed President John Williams said
it could be volatile in the near term and that the central bank,
which has a target of 2%, knows how to act if it gets too high.

    The Fed also released its Beige Book, a collection of
anecdotes about the economy from the central bank's 12 regional
districts, which indicated the economic recovery accelerated to
a moderate pace from late February to early April.
    The two-year Treasury yield, which typically
moves in step with interest rate expectations, was last less
than a basis point higher at 0.163%. 
    A closely watched part of the yield curve that measures the
gap between yields on two- and 10-year Treasury notes 
 was last 1.40 basis points steeper at 147.11 basis
    April 14 Wednesday 3:37PM New York / 1937 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.02         0.0203    0.000
 Six-month bills               0.04         0.0406    0.000
 Two-year note                 99-237/256   0.163     0.002
 Three-year note               100-12/256   0.3593    0.008
 Five-year note                99-120/256   0.8596    0.020
 Seven-year note               99-160/256   1.3065    0.018
 10-year note                  95-96/256    1.6359    0.013
 20-year bond                  94-128/256   2.2192    0.024
 30-year bond                  90-116/256   2.3201    0.012
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        11.50         0.00    
 U.S. 3-year dollar swap        12.00         0.25    
 U.S. 5-year dollar swap         8.75        -0.75    
 U.S. 10-year dollar swap       -0.75        -1.50    
 U.S. 30-year dollar swap      -27.00        -3.00    
 spread (By Karen Pierog in Chicago
Editing by Jan Harvey and Matthew Lewis)