Bonds News

TREASURIES-Yields jump as Powell boosts inflation expectations, and on Biden stimulus plans

 (Adds comments from Fed Chair Powell)
    By Herbert Lash
    NEW YORK, Jan 14 (Reuters) - Treasury yields rose on
Thursday after dovish comments from Federal Reserve Chairman
Jerome Powell boosted expectations for a jump in inflation, and
before President-elect Joe Biden was to announce details of a
new stimulus package.
    Powell said in a web symposium with Princeton University
that a lesson from the financial crisis a decade ago is not to
exit a bond-buying program too early, indicating the Fed was not
close to stopping its $120 billion-a-month purchases of bonds.
    He added that an interest rate increase would come "no time
soon" given the depth of the economic problems related to the
still-raging coronavirus crisis.
    The dovish comments reinforced expectations that the Fed
will allow inflation to rise above the Fed's target of 2% for
longer before raising rates.
    Yields on the 10-year Treasury note rose as high
as 1.138%, up from an earlier low of 1.075%. 
    Inflation expectations also increased, with 10-year TIPS
 now pricing in average annual inflation of 2.09%
for the next decade, up from 2.06% before Powell's comments.
    Powell was adamant about his policies without any hesitation
or showing any concern about inflation, said Lou Brien, market
strategist at DRW Trading in Chicago. 
    Other Fed officials this week also have pushed back at
speculation that they are close to curbing the U.S. central
bank's monthly bond purchases or raising short-term rates.
    Yields hit session highs on Thursday afternoon after a
report that President-elect Joe Biden will unveil a stimulus
proposal with around $1.9 trillion in aid later on Thursday.

    Yields briefly dipped earlier on Thursday after the number
of Americans filing first-time applications for unemployment
benefits surged last week, the Labor Department said in a report
that confirmed the labor market was weakening as a surge in
COVID-19 cases disrupts businesses.
    Initial claims for state unemployment benefits increased
181,000 to a seasonally adjusted 965,000 for the week ended Jan.
9, the highest since late August. Economists polled by Reuters
had forecast 795,000 applications for the latest week.
    A swift market sell-off last week pushed yields on 10-year
Treasuries to highs last seen in March. Strong demand for the
Treasury Department's auctions of 10-year and 30-year debt this
week helped stem the sell-off and pull yields lower.
    The yield curve between two-year and 10-year notes
 steepened to 97.90 basis points. 
    Thirty-year bond yields traded at 1.869%, up
from earlier lows of 1.806%.
    Five-year note yields edged up to 0.480%.
    January 14 Thursday 4:03PM New York / 2103 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.08         0.0811    -0.005
 Six-month bills               0.09         0.0913    -0.003
 Two-year note                 99-246/256   0.145     -0.002
 Three-year note               99-180/256   0.2244    0.000
 Five-year note                99-124/256   0.4803    0.006
 Seven-year note               98-188/256   0.8124    0.021
 10-year note                  97-172/256   1.1258    0.038
 20-year bond                  95           1.6722    0.050
 30-year bond                  94-112/256   1.8691    0.051
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         6.50        -0.50    
 U.S. 3-year dollar swap         5.75        -0.25    
 U.S. 5-year dollar swap         6.75        -0.25    
 U.S. 10-year dollar swap        0.25        -0.50    
 U.S. 30-year dollar swap      -25.25        -0.75    
 spread (Reporting by Herbert Lash
Editing by Paul Simao and Jonathan Oatis)