February 13, 2018 / 4:13 PM / 2 months ago

TREASURIES-Yields slip, along with U.S. stocks, before inflation data

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Feb 13 (Reuters) - U.S. long-dated Treasury yields
slipped on Tuesday in quiet trading, tracking the decline in
stocks ahead of a crucial U.S. inflation report on Wednesday
that could shed more light on the pace of future interest rate
increases by the Federal Reserve.
    "We're seeing stocks trading lower and so perhaps the
Treasury market is a little bit on edge," said Gennadiy
Goldberg, interest rates strategist, at TD Securities in New
York.
    "I think overall the market is waiting for tomorrow's CPI
(consumer price index) report and it's unwilling to put in
strong positions ahead of that report. People want to see if it
would confirm the recent trend of strong inflation and strong
growth."
    Economists expect a 0.3 percent rise in inflation in January
and a core figure of 0.2 percent, according to a Reuters poll.
    Investors started to worry more about inflation after a
prolonged period of stagnant price gains, spooked by robust wage
increases of 2.9 percent in the January U.S. jobs report, and
its impact on borrowing costs.
    That caused sharp volatility in the stock market.
    U.S. 10-year yields, which move inversely to prices, have
risen about 43 basis points so far this year. U.S. 30-year
yields are on similar path, climbing 38 basis points in 2018. 
    Part of the run-up, however, was not all due to events in
the United States, analysts said. 
    TD's Goldberg said global central banks such as the European
Central Bank and Bank of England have started to normalize their
monetary policies, pushing yields higher. That has spilled over
to the U.S. Treasury market.  
    "There is a global re-pricing of the quantitative easing
trade," Goldberg said. 
    In late-morning trading, U.S. 10-year yields
fell to 2.842 percent from 2.855 percent late on Monday. U.S.
10-year yields hit 2.902 percent on Monday, the highest since
January 2014.
    U.S. 30-year bond yields fell to 3.129 percent,
from Monday's 3.136 percent. The yield on the maturity touched
an 11-month peak of 3.139 percent on Monday.
    
    February 13 Tuesday 10:48 AM EST / 1548 GMT
                               Price                  
 US T BONDS MAR8               144-12/32    -0-1/32   
 10YR TNotes MAR8              120-244/256  0-16/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.58         1.6084    0.007
 Six-month bills               1.7625       1.8031    -0.016
 Two-year note                 99-206/256   2.102     0.025
 Three-year note               99-208/256   2.3151    0.011
 Five-year note                99-46/256    2.552     -0.002
 Seven-year note               98-100/256   2.7556    -0.006
 10-year note                  99-44/256    2.8457    -0.009
 30-year bond                  97-116/256   3.1315    -0.004
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        26.00        -1.75    
 spread                                               
 U.S. 3-year dollar swap        18.00        -0.50    
 spread                                               
 U.S. 5-year dollar swap         9.50         0.00    
 spread                                               
 U.S. 10-year dollar swap        1.00         0.00    
 spread                                               
 U.S. 30-year dollar swap      -17.50        -0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Jeffrey
Benkoe)
  
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