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David Randall

TREASURIES-Benchmark 10-year yield falls below 1.5% as variant spurs hunt for safe havens

Nov 26 2021

(Updates trading throughout, tweaks headline) By David Randall NEW YORK, Nov 26 U.S. Treasury debt yields on Friday posted their sharpest drop since the pandemic began as investors rushed toward safe-haven assets following the emergence of a new coronavirus variant in South Africa. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 14.2 basis points at 0.502, the sharpest drop since March 2020. The yield on 10-year Treasury notes was down 16.8 basis points to 1.477%. It last traded at these levels in early November. The yield on the 30-year Treasury bond was down 14.2 basis points to 1.829%. "The economic recovery has been quite impressive and the one thing that could knock it over completely would be a more dangerous variant. Time will tell how worried we should be, but investors are selling in front of potential bad news," said Ryan Detrick, chief market strategist for LPL Financial. Yields had been rising throughout the week following President Joe Biden's announcement Monday that he would renominate Jerome Powell to a second term at the helm of the Federal Reserve. That, along with signs of strength in the U.S. economy, had pressed investors into taking bets the Fed would move more aggressively to fight inflation. European stocks suffered their worst day in 17 months as countries in Europe tightened travel controls in hopes of containing the new variant. In the United States, the blue-chip Dow Jones Industrial Average fell 2.5%, while the Russell 2000 index of smaller companies tumbled more than 3.6%. The yield curve steepened, with spreads between five- and 30-year Treasuries rising back to the levels before the news Monday of Powell's reappointment. Futures on the U.S. federal funds rate, which track short-term interest rate expectations, jumped as investors rethought bets the Fed would move quickly to hike rates to quell inflation. According to CME's FedWatch tool, money market traders were pricing in a 58.5% chance of at least a 0.25% hike by the Federal Open Market Committee's June meeting, down from an 82.1% chance Wednesday before the U.S. Thanksgiving holiday, and a 67% chance a week ago before Biden renominated Powell. The 10-year TIPS breakeven rate was last at 2.553%. November 26 Friday 2:30PM New York / 1930 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0525 0.0532 -0.008 Six-month bills 0.0925 0.0938 -0.005 Two-year note 99-252/256 0.5078 -0.136 Three-year note 99-210/256 0.8115 -0.152 Five-year note 100-100/256 1.1693 -0.175 Seven-year note 100-170/256 1.4001 -0.179 10-year note 99-4/256 1.4816 -0.162 20-year bond 101-244/256 1.8821 -0.152 30-year bond 101-24/256 1.8274 -0.144 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 22.75 -0.50 spread U.S. 3-year dollar swap 21.50 -0.75 spread U.S. 5-year dollar swap 10.75 0.50 spread U.S. 10-year dollar swap 4.25 -0.75 spread U.S. 30-year dollar swap -17.25 0.00 spread (Reporting by David Randall; Editing by Kirsten Donovan, David Clarke, Chris Reese and Alex Richardson)

TREASURIES-Benchmark 10-year yield falls to near 1.5% as variant spurs hunt for safe havens

Nov 26 2021

(Adds Fed funds rate, changes headline, updates trading throughout) By David Randall NEW YORK, Nov 26 U.S. Treasury debt yields on Friday posted their sharpest drop since the pandemic began as investors rushed toward safe-haven assets following the emergence of a new coronavirus variant in South Africa. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 12.4 basis points at 0.520%, the sharpest drop since March 2020. The yield on 10-year Treasury notes was down 13.5 basis points to 1.509%. It last traded at these levels in early November. The yield on the 30-year Treasury bond was down 12.1 basis points to 1.850%. "The economic recovery has been quite impressive and the one thing that could knock it over completely would be a more dangerous variant. Time will tell how worried we should be, but investors are selling in front of potential bad news," said Ryan Detrick, chief market strategist for LPL Financial. Yields had been rising throughout the week following President Joseph Biden's announcement Monday that he would renominate Jerome Powell to a second term at the helm of the Federal Reserve. That, along with signs of strength in the U.S. economy, had pressed investors into taking bets the Fed would move more aggressively to fight inflation. European stocks suffered their worst day in 17 months as countries in Europe tightened travel controls in hopes of containing the new variant. In the United States, the blue-chip Dow Jones Industrial Average fell more than 2%, while the Russell 2000 index of smaller companies tumbled more than 3.6%. The yield curve steepened, with spreads between five- and 30-year Treasuries rising back to the levels before the news Monday of Powell's reappointment. Futures on the U.S. federal funds rate, which track short-term interest rate expectations, jumped as investors rethought bets the Fed would move quickly to hike rates to quell inflation. According to CME's FedWatch tool, money market traders were pricing in a 58.5% chance of at least a 0.25% hike by the Federal Open Market Committee's June meeting, down from an 82.1% chance Wednesday before the U.S. Thanksgiving holiday, and a 67% chance a week ago before Biden renominated Powell. The 10-year TIPS breakeven rate was last at 2.553%. November 26 Friday 12:24PM New York / 1724 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 -0.010 Six-month bills 0.0875 0.0888 -0.010 Two-year note 99-245/256 0.5216 -0.122 Three-year note 99-198/256 0.8276 -0.136 Five-year note 100-64/256 1.1983 -0.146 Seven-year note 100-116/256 1.4317 -0.147 10-year note 98-200/256 1.5072 -0.137 20-year bond 101-144/256 1.9055 -0.128 30-year bond 100-156/256 1.8484 -0.123 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 22.75 -0.50 spread U.S. 3-year dollar swap 21.50 -0.75 spread U.S. 5-year dollar swap 10.25 0.00 spread U.S. 10-year dollar swap 4.25 -0.75 spread U.S. 30-year dollar swap -18.00 -0.75 spread (Reporting by David Randall; Editing by Kirsten Donovan, David Clarke and Chris Reese)

TREASURIES-Yields tumble as new virus variant spurs hunt for safe havens

Nov 26 2021

(Adds quote, updates trading throughout) By David Randall NEW YORK, Nov 26 U.S. Treasury yields posted their sharpest drop since the pandemic began Friday as investors rushed toward safe haven assets following the emergence of a new coronavirus variant in South Africa. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 14.2 basis points at 0.502, the sharpest drop since March 2020. The yield on 10-year Treasury notes was down 14.9 basis points at 1.495%, the largest drop since February of this year. It last traded at these levels in early November. "The economic recovery has been quite impressive and the one thing that could knock it over completely would be a more dangerous variant. Time will tell how worried we should be, but investors are selling in front of potential bad news," said Ryan Detrick, chief market strategist for LPL Financial. Yields had been rising throughout the week following President Joseph Biden's announcement Monday that he would renominate Jerome Powell to a second term at the helm of the Federal Reserve. That, along with signs of strength in the U.S. economy, had pressed investors into taking bets that the Fed would move more aggressively to fight inflation. "Inflation is rising, and COVID news are getting worrisome. The problem is that they can't use the same tools to fight back inflation and the economic slowdown. And the choice will be difficult," said Ipek Ozkardeskaya, a senior analyst at Swissquote. European stocks were set for their worst day in more than a year as countries in Europe tightened travel controls in hopes of containing the new variant. In the United States, the blue-chip Dow Jones Industrial Average fell more than 2%, while the Russell 2000 index of smaller companies tumbled more than 3.6%. The yield curve steepened, with spreads between five- and 30-year Treasuries rising back to their levels before the news of Powell's reappointment on Monday. November 26 Friday 10:52AM New York / 1552 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0525 0.0532 -0.008 Six-month bills 0.0875 0.0888 -0.010 Two-year note 99-253/256 0.5059 -0.138 Three-year note 99-216/256 0.8035 -0.160 Five-year note 100-92/256 1.1758 -0.168 Seven-year note 100-152/256 1.4106 -0.168 10-year note 98-228/256 1.4953 -0.149 20-year bond 101-128/256 1.9092 -0.125 30-year bond 100-144/256 1.8504 -0.121 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 22.00 -1.25 spread U.S. 3-year dollar swap 21.00 -1.25 spread U.S. 5-year dollar swap 10.25 0.00 spread U.S. 10-year dollar swap 4.25 -0.75 spread U.S. 30-year dollar swap -18.00 -0.75 spread (Reporting by David Randall; Editing by Kirsten Donovan and David Clarke)

TREASURIES-Yields tumble as new virus variant spurs hunt for safe havens

Nov 26 2021

By David Randall NEW YORK, Nov 26 U.S. Treasury yields posted their sharpest drop since the pandemic began Friday as investors rushed toward safe haven assets following the emergence of a new coronavirus variant in South Africa. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 11.3 basis points at 0.532%, the sharpest drop since March 2020. The yield on 10-year Treasury notes was down 11.3 basis points to 1.531%, the largest drop since February of this year. Yields fall when prices rise. Yields had been rising throughout the week following President Joseph Biden's announcement Monday that he would renominate Jerome Powell to a second term at the helm of the Federal Reserve. That, along with signs of strength in the U.S. economy, had pressed investors into taking bets that the Fed would move more aggressively to fight inflation. "Inflation is rising, and Covid news are getting worrisome. The problem is that they can’t use the same tools to fight back inflation and the economic slowdown. And the choice will be difficult," said Ipek Ozkardeskaya, a senior analyst at Swissquote. European stocks were set for their worst day in more than a year as countries in Europe tightened travel controls in hopes of containing the new variant. The yield curve steepened, with spreads between 5- and 30-year Treasuries rising back to their levels before the news of Powell's reappointment on Monday. November 26 Friday 9:26AM New York / 1426 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0575 0.0583 -0.003 Six-month bills 0.09 0.0913 -0.008 Two-year note 99-241/256 0.5295 -0.114 Three-year note 99-202/256 0.8222 -0.142 Five-year note 100-56/256 1.2048 -0.139 Seven-year note 100-88/256 1.4482 -0.131 10-year note 98-136/256 1.5345 -0.110 20-year bond 100-192/256 1.9544 -0.080 30-year bond 99-136/256 1.8956 -0.075 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 22.50 -0.75 spread U.S. 3-year dollar swap 22.75 0.50 spread U.S. 5-year dollar swap 10.25 0.00 spread U.S. 10-year dollar swap 4.75 -0.25 spread U.S. 30-year dollar swap -18.00 -0.75 spread (Reporting by David Randall; Editing by Kirsten Donovan)

TREASURIES-Yields hover near highs in choppy trading after FOMC minutes

Nov 24 2021

(Updates with FOMC minute release, updates trading throughout) By David Randall NEW YORK, Nov 24 U.S. Treasury yields hovered near highs for the year in choppy trading after data released Wednesday suggested the job market and consumer spending continue to improve. The number of Americans filing new claims for unemployment benefits fell to the lowest since 1969 last week, the Labor Department said. At the same time, personal consumption rose 1.7% - slightly more than the estimated 1.6% - in the third quarter. The yield on 10-year Treasury notes was down 1.2 basis points to 1.653% after rising as much as 3 basis points earlier in the day, near its high for the year of 1.74% reached in March. The yield on the 30-year Treasury bond was down 4.2 basis points to 1.981%. Signs of strength in the economy will likely reinforce investors' belief that inflation will accelerate and weigh on Treasury prices, said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. "The market has been and continues to lean bearishly duration, which suggests that a collective shift back closer to neutral would create a meaningful round of buying in Treasuries," he said. At the Federal Reserve, some policymakers may be open to accelerating its tapering program, minutes from its latest policy meeting revealed. Fed officials agreed at the Nov. 2-3 meeting to begin reducing its pandemic relief of $120 billion in monthly purchases of Treasuries and mortgage-backed securities with a timeline that would see them tapered completely by next June. "If we have the largest buyer of Treasuries, who is very price insensitive, stepping out of the market we think that it makes sense that we will see yields move higher," said Brian Jacobsen, senior investment strategist at Allspring Global Investments. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 3.4 basis points at 0.642%. The yield curve flattened, with spreads between 5- and 30-year Treasuries tightening near their lowest levels since March 2020. November 24 Wednesday 2:30PM New York / 1930 GMT Price Current Net Yield % Change (bps) Three-month bills 0.06 0.0608 0.010 Six-month bills 0.0975 0.0989 0.023 Two-year note 99-184/256 0.6417 0.034 Three-year note 99-96/256 0.964 0.027 Five-year note 99-138/256 1.3456 0.012 Seven-year note 99-116/256 1.5828 -0.004 10-year note 97-120/256 1.6514 -0.014 20-year bond 99-72/256 2.044 -0.028 30-year bond 97-164/256 1.9797 -0.043 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 23.50 1.00 spread U.S. 3-year dollar swap 22.75 1.50 spread U.S. 5-year dollar swap 10.25 0.25 spread U.S. 10-year dollar swap 5.00 -0.50 spread U.S. 30-year dollar swap -17.00 0.25 spread (Reporting by David Randall; Editing by Nick Zieminski and Chizu Nomiyama)

TREASURIES-Yields hover near highs in choppy trading after jobs data

Nov 24 2021

(Adds quote, tweaks headline, updates trading throughout) By David Randall NEW YORK, Nov 24 U.S. Treasury yields hovered near highs for the year in choppy trading after data released Wednesday suggested the job market and consumer spending continue to improve. The number of Americans filing new claims for unemployment benefits fell to the lowest since 1969 last week, the Labor Department said. At the same time, personal consumption rose 1.7% - slightly more than the estimated 1.6% - in the third quarter. The yield on 10-year Treasury notes was down 1.7 basis points to 1.648% after rising as much as 3 basis points earlier in the day, near its high for the year of 1.74% reached in March. The yield on the 30-year Treasury bond was down 3.6 basis points to 1.987%. Signs of strength in the economy will likely reinforce investors' belief that inflation will accelerate and weigh on Treasury prices, said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. "The market has been and continues to lean bearishly duration, which suggests that a collective shift back closer to neutral would create a meaningful round of buying in Treasuries," he said. Investors will be watching for signs that the Federal Reserve may be open to accelerating its tapering program when the minutes from the central bank's last policy meeting are released later this afternoon, said Brian Jacobsen, senior investment strategist at Allspring Global Investments. Fed officials agreed at the Nov. 2-3 meeting to begin reducing its pandemic relief of $120 billion in monthly purchases of Treasuries and mortgage-backed securities with a timeline that would see them tapered completely by next June. "If we have the largest buyer of Treasuries, who is very price insensitive, stepping out of the market we think that it makes sense that we will see yields move higher," Jacobsen said. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 2.8 basis points at 0.636%. The yield curve flattened, with spreads between 5- and 30-year Treasuries tightening near their lowest levels since March 2020. November 24 Wednesday 12:05PM New York / 1705 GMT Price Current Net Yield % Change (bps) Three-month bills 0.06 0.0608 0.010 Six-month bills 0.095 0.0964 0.020 Two-year note 99-187/256 0.6358 0.028 Three-year note 99-104/256 0.9532 0.016 Five-year note 99-150/256 1.3359 0.002 Seven-year note 99-128/256 1.5757 -0.011 10-year note 97-132/256 1.6462 -0.019 20-year bond 99-80/256 2.0421 -0.030 30-year bond 97-152/256 1.9819 -0.041 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 23.00 0.50 spread U.S. 3-year dollar swap 22.25 1.00 spread U.S. 5-year dollar swap 10.25 0.25 spread U.S. 10-year dollar swap 5.00 -0.50 spread U.S. 30-year dollar swap -17.50 -0.25 spread (Reporting by David Randall; Editing by Bernadette Baum and Nick Zieminski)

TREASURIES-Treasury yields inch toward highs for year on strong economic data

Nov 24 2021

By David Randall NEW YORK, Nov 24 U.S. Treasury yields continued to inch toward their highs for the year after data released Wednesday suggested the job market and consumer spending continue to improve. The number of Americans filing new claims for unemployment benefits fell to their lowest since 1969 last week, the Labor Department said. At the same time, personal consumption rose 1.7% - slightly more than the estimated 1.6% - in the third quarter. The yield on benchmark 10-year Treasury notes was up 2.5 basis points at 1.690%, near its high for the year of 1.74% reached in March. The yield on the 30-year Treasury bond was up 1.1 basis points to 2.034%. Signs of strength in the economy will likely reinforce investors' belief that inflation will accelerate and weigh on Treasury prices, said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. "The market has been and continues to lean bearishly duration, which suggests that a collective shift back closer to neutral would create a meaningful round of buying in Treasuries," he said. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 3.6 basis points at 0.644%. The yield curve flattened, with spreads between 5- and 30-year Treasuries tightening near their lowest levels since March 2020. November 24 Wednesday 9:17AM New York / 1417 GMT Price Current Net Yield % Change (bps) Three-month bills 0.055 0.0558 0.005 Six-month bills 0.0825 0.0837 0.008 Two-year note 99-186/256 0.6378 0.030 Three-year note 99-96/256 0.964 0.027 Five-year note 99-116/256 1.3635 0.030 Seven-year note 99-76/256 1.6066 0.020 10-year note 97-40/256 1.6861 0.021 20-year bond 98-144/256 2.0884 0.016 30-year bond 96-128/256 2.0315 0.009 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 23.50 1.00 spread U.S. 3-year dollar swap 22.50 1.25 spread U.S. 5-year dollar swap 10.00 0.00 spread U.S. 10-year dollar swap 5.00 -0.50 spread U.S. 30-year dollar swap -17.75 -0.50 spread (Reporting by David Randall; Editing by Bernadette Baum)

TREASURIES-Yields edge near year's highs as investors expect Fed to act on inflation

Nov 23 2021

(Updates prices throughout) By David Randall NEW YORK, Nov 23 U.S. Treasury yields edged higher in choppy trading in a holiday-shortened week on Tuesday as investors prepared for the Federal Reserve to become more aggressive in fighting inflation after President Joe Biden nominated Chair Jerome Powell for a second term. The yield on 10-year Treasury notes was up 5.7 basis points to 1.682%, its highest level in a week and less than 10 basis points below the high for the year, hit in March. The yield on the 30-year Treasury bond was up 6.2 basis points to 2.040%. The move higher in yields was not uniform, however. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 1.4 basis points at 0.616% after touching its highest level since March 2020 on Monday. "The pressure on the Fed to react to the recent acceleration in inflation is building, not just from the so-called inflation vigilantes and the hawks on the Committee, but also from the progressive academics and from their peers at other central banks," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities. Not all investors expect the Fed to act against inflation in the next few months. The Treasury Department auctioned $59 billion in 7-year notes on Tuesday, with direct bidders taking their highest percentage of the inventory since December 2019. That level of investor interest could mean that the recent rise in yields may be short-lived, said Thomas Simons, an economist at Jefferies. "The strong auction bid suggests that the market might finally be finding some footing," he said. "Does it make sense to price in more rate hikes over the next couple of years? We do not think so, and it looks like Direct bidders agree. We expect that the market will start to clean up the mess here, and it will trade well after Thanksgiving and into month-end." The yield curve slightly steepened, with spreads between 5- and 30-year Treasuries rising on Tuesday after touching their lowest levels since March 2020 the previous day. The yield on 5-year Treasury Inflation Protected Securities slipped to end at -1.695% and the yield on the 10-year TIP closed at -0.96, its highest end of day yield since Nov 3. November 23 Tuesday 4:17PM New York / 2117 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0525 0.0532 0.000 Six-month bills 0.075 0.0761 0.000 Two-year note 99-197/256 0.6161 -0.014 Three-year note 99-106/256 0.9502 0.011 Five-year note 99-136/256 1.3472 0.023 Seven-year note 98-152/256 1.5899 0.041 10-year note 97-48/256 1.6824 0.057 20-year bond 98-116/256 2.0952 0.070 30-year bond 96-76/256 2.0408 0.063 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 22.50 -4.00 spread U.S. 3-year dollar swap 21.00 -0.50 spread U.S. 5-year dollar swap 10.00 -0.75 spread U.S. 10-year dollar swap 5.25 -0.25 spread U.S. 30-year dollar swap -17.50 0.00 spread (Reporting by David Randall; editing by Barbara Lewis, Mark Heinrich and Dan Grebler)

CORRECTED-TREASURIES-Yields edge near '21 highs as investors expect Fed to act on inflation

Nov 23 2021

(Corrects 5-year TIP yield in final graph) By David Randall NEW YORK, Nov 23 U.S. Treasury yields edged higher in choppy trading in a holiday-shortened week on Tuesday as investors prepared for the Federal Reserve to become more aggressive in fighting inflation after President Joe Biden nominated its chair Jerome Powell for a second term. The yield on 10-year Treasury notes was up 3.5 basis points to 1.660%, its highest level in a week and less than 10 basis points below the high for the year it hit in March. The yield on the 30-year Treasury bond was up 3.6 basis points to 2.014%. The move higher in yields was not uniform, however: the two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 2 basis points at 0.610% after touching its highest level since March 2020 on Monday. "The pressure on the Fed to react to the recent acceleration in inflation is building, not just from the so-called inflation vigilantes and the hawks on the Committee, but also from the progressive academics and from their peers at other central banks," said Steven Ricchiuto, U.S. Chief Economist at Mizuho Securities. Not all investors expect the Fed to act in the next few months against inflation. The Treasury Department auctioned $59 billion in 7-year notes Tuesday, with direct bidders taking their highest percentage of the inventory since December 2019. That level of investor interest could mean that the recent rise in yields may be short-lived, said Thomas Simons, an economist at Jefferies. "The strong auction bid suggests that the market might finally be finding some footing," he said. "Does it make sense to price in more rate hikes over the next couple of years? We do not think so, and it looks like Direct bidders agree. We expect that the market will start to clean up the mess here, and it will trade well after Thanksgiving and into month-end." The yield curve, meanwhile, slightly steepened, with spreads between 5- and 30-year Treasuries rising Tuesday after touching their lowest levels since March 2020 the day before. The yield on 5-year Treasury Inflation Protected Securities (TIPS) slipped to end at -1.695% . November 23 Tuesday 1:44PM New York / 1844 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 -0.002 Six-month bills 0.075 0.0761 0.000 Two-year note 99-200/256 0.6102 -0.020 Three-year note 99-118/256 0.9341 -0.005 Five-year note 99-154/256 1.3326 0.009 Seven-year note 98-178/256 1.5743 0.025 10-year note 97-100/256 1.6599 0.035 20-year bond 98-232/256 2.0671 0.042 30-year bond 96-204/256 2.0179 0.040 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 22.50 -4.00 spread U.S. 3-year dollar swap 21.00 -0.50 spread U.S. 5-year dollar swap 10.00 -0.75 spread U.S. 10-year dollar swap 5.50 0.00 spread U.S. 30-year dollar swap -17.25 0.25 spread (Reporting by David Randall; editing by Barbara Lewis and Mark Heinrich)

REFILE-TREASURIES-Yields edge higher as investors expect Fed to act on inflation

Nov 23 2021

(Refiles to add dropped letter in tag. No changes to text.) By David Randall NEW YORK, Nov 23 U.S. Treasury yields edged higher in choppy trading in a holiday-shortened week on Tuesday as investors prepared for the Federal Reserve to become more aggressive in fighting inflation after President Joe Biden nominated its chair Jerome Powell for a second term. The yield on 10-year Treasury notes was up 3.1 basis points to 1.656%, its highest level in one week and approximately 10 basis points below the yearly high it hit in March. The yield on the 30-year Treasury bond was up 3.1 basis points to 2.009%. The move higher in yields was not uniform, however, with the two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, down 2.4 basis points at 0.606% after hitting its highest level since March 2020 on Monday. "The pressure on the Fed to react to the recent acceleration in inflation is building not just from the so-called inflation vigilantes and the hawks on the Committee, but also from the progressive academics and from their peers at other central banks," said Steven Ricchiuto, U.S. Chief Economist at Mizuho Securities. Not all investors expect the Fed to act in the next few months against inflation. The Treasury Department auctioned $59 billion in 7-year notes Tuesday, with direct bidders taking their highest percentage of the inventory since December 2019. That level of investor interest could mean that the recent rise in yields may be short-lived, Thomas Simons, an economist at Jefferies, said. "The strong auction bid suggests that the market might finally be finding some footing," he said. "Does it make sense to price in more rate hikes over the next couple of years? We do not think so, and it looks like Direct bidders agree. We expect that the market will start to clean up the mess here, and it will trade well after Thanksgiving and into month-end." The yield curve, meanwhile, slightly steepened, with spreads between 5- and 30-year Treasuries rising Tuesday after touching their lowest levels since March 2020 the day before. November 23 Tuesday 1:44PM New York / 1844 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 -0.002 Six-month bills 0.075 0.0761 0.000 Two-year note 99-200/256 0.6102 -0.020 Three-year note 99-118/256 0.9341 -0.005 Five-year note 99-154/256 1.3326 0.009 Seven-year note 98-178/256 1.5743 0.025 10-year note 97-100/256 1.6599 0.035 20-year bond 98-232/256 2.0671 0.042 30-year bond 96-204/256 2.0179 0.040 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 22.50 -4.00 spread U.S. 3-year dollar swap 21.00 -0.50 spread U.S. 5-year dollar swap 10.00 -0.75 spread U.S. 10-year dollar swap 5.50 0.00 spread U.S. 30-year dollar swap -17.25 0.25 spread (Reporting by David Randall; editing by Barbara Lewis)

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