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Karen Pierog

TREASURIES-Yields rise as Fed eyes earlier start to rate hikes

Jun 16 2021

(Updates yields, adds analyst comments) By Karen Pierog CHICAGO, June 16 U.S. Treasury yields zoomed higher on Wednesday after Federal Reserve policymakers moved up their projections for commencing interest rates hikes to 2023 from 2024 as the economy recovers from the coronavirus pandemic. At the conclusion of its two-day policy meeting, the Fed disclosed that 11 out of 18 officials were projecting at least two quarter-point interest rate increases in 2023 even as the central bank pledged to keep a supportive policy in place to aid the ongoing jobs recovery. The benchmark 10-year yield rose to its highest level since June 4 at 1.594%. It was last up 7.5 basis points at 1.5737%. The yield had trended lower over the last week as inflation concerns ebbed. The five-year yield had its biggest one-day move since February, climbing to its highest level since April 6 at 0.913%. The yield curve measuring the gap between 5-and 30-year yields flattened, with the spread falling to its lowest level since January. It was last about 9 basis points flatter at 131.46 basis points. Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research in New York, said the changes in the so-called dot plot, where Fed officials place their projections for the federal funds rate, was the "big surprise" that drove yields higher. "It's still a long way out and (Fed Chair Jerome) Powell is trying to play down that, but I think the most anyone was looking for was one rate hike in 2023," Jones said. The fed funds futures market showed a roughly 90% chance of a rate hike by January 2023. Prior to the Fed statement, the market fully priced in a rate increase by April 2023. With inflation rising more quickly than expected and the economy bouncing back swiftly, the market had been looking for clues of when the Fed might alter the policies put into place last year to combat the economic fallout from the pandemic. As for the Fed's $120 billion in monthly bond purchases, Powell told reporters that officials were "talking about talking about" tapering them. In the meantime, officials said those purchases would continue until "substantial further progress" has been made toward the central bank's maximum employment and 2% inflation goals. The Fed raised the interest it pays on excess reserves (IOER) to 0.15% from 0.1% and the rate on overnight reverse repurchase agreements to 0.05% from 0% starting on Thursday. "The IOER hike is really about relieving some of the strains in the front-end of the curve related to a tsunami of cash in the financial system," said Guy LeBas, chief fixed income strategist at Janney Capital Management. "Banks are overreserved, money market funds are finding it hard to get positive yield anywhere - and so it addresses some of those problems." The amount of money pouring into the reverse repurchase agreement facility, which offers approved money managers the option to lend money to the Fed overnight in return for Treasury collateral, has ballooned, hitting a record $584 billion on Monday. The Fed accepted nearly $521 billion on Wednesday. The two-year Treasury yield saw its biggest one-day move since February and rose to its highest level in about a year at 0.213%. It was last 3.6 basis points higher at 0.2032%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last about 4.66 basis points steeper at 136.88 basis points. June 16 Wednesday 4:27PM New York / 2027 GMT Price Current Net Yield % Change (bps) Three-month bills 0.04 0.0406 0.016 Six-month bills 0.045 0.0456 0.005 Two-year note 99-217/256 0.2032 0.036 Three-year note 99-134/256 0.4103 0.068 Five-year note 99-82/256 0.8906 0.106 Seven-year note 99-180/256 1.2948 0.101 10-year note 100-120/256 1.5737 0.075 20-year bond 101-216/256 2.1358 0.019 30-year bond 103-192/256 2.2031 0.004 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 6.50 -1.25 spread U.S. 3-year dollar swap 9.00 -0.75 spread U.S. 5-year dollar swap 7.00 0.00 spread U.S. 10-year dollar swap -3.00 0.00 spread U.S. 30-year dollar swap -30.25 1.75 spread (Reporting by Karen Pierog; additional reporting by Karen Brettell in New York, Editing by Leslie Adler and Will Dunham)

TREASURIES-Yields rise as Fed eyes earlier start to rate hikes

Jun 16 2021

(Recasts with Fed meeting statement; updates yields) By Karen Pierog CHICAGO, June 16 U.S. Treasury yields shot up on Wednesday after Federal Reserve policymakers moved up their projections for commencing interest rates hikes to 2023 from 2024 as the economy recovers from the coronavirus pandemic. At the conclusion of its two-day policy meeting, the Fed disclosed that 11 out of 18 officials were projecting at least two quarter-point interest rate increases in 2023 even as the central bank pledged to keep a supportive policy in place to aid the ongoing jobs recovery. The benchmark 10-year yield was last up 5.6 basis points at 1.555%, its highest level in a week. With inflation rising faster than expected and the economy bouncing back quickly, the market had been looking for clues of when the Fed may alter the policies put into place last year to combat the economic fallout from the pandemic, including a massive bond-buying program. The Fed raised the interest it pays on excess reserves (IOER) to 0.15% from 0.1% and the rate on overnight reverse repurchase agreements to 0.05% from 0%. The two-year Treasury yield was last 3 basis points higher at 0.1971%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last about 3 basis points steeper at 135.31 basis points. The yield curve between five-year notes and 30-year bonds flattened by about 8.52 basis points to 132.01 basis points. June 16 Wednesday 2:35PM New York / 1835 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0425 0.0431 0.018 Six-month bills 0.0575 0.0583 0.017 Two-year note 99-220/256 0.1971 0.030 Three-year note 99-144/256 0.3971 0.055 Five-year note 99-106/256 0.8711 0.086 Seven-year note 99-222/256 1.27 0.076 10-year note 100-164/256 1.555 0.056 20-year bond 101-244/256 2.1291 0.012 30-year bond 103-232/256 2.1961 -0.003 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.50 -0.25 spread U.S. 3-year dollar swap 9.25 -0.50 spread U.S. 5-year dollar swap 6.75 -0.25 spread U.S. 10-year dollar swap -3.00 0.00 spread U.S. 30-year dollar swap -30.75 1.25 spread (Reporting by Karen Pierog; Editing by Leslie Adler)

TREASURIES-Yields drift lower as latest views from Fed awaited

Jun 16 2021

By Karen Pierog CHICAGO, June 16 U.S. Treasury yields eased slightly on Wednesday as the market looked to the conclusion of the Federal Reserve's two-day meeting for policymakers' latest economic projections and clues on when the central bank may shift from its current monetary policy. The benchmark 10-year yield was last down 1 basis point at 1.4888%. With inflation rising faster than expected and the economy bouncing back quickly, all eyes will be on the Fed later on Wednesday for signs that the policies it put into place last year to combat the economic fallout from the pandemic, including a massive bond-buying program, may be altered. Anders Persson, chief investment officer of global fixed income at Nuveen, said the Fed is likely to remain on its current course, leaving the range-bound Treasury market without a clear direction. "We think (Fed Chair Jerome) Powell will continue to emphasize the lack of sufficient progress on the labor markets and we expect him to reiterate expectations that the current inflation spike will be transitory. I think we're going to have more of the same here again," he said. Persson also noted economic data has been mixed and subject to revisions. "Truly, to getting a read on where the economy is heading and where inflation is heading, we don't think we're going to have those data points until the fall," he said. The Fed is not expected to announce plans to taper its monthly $120 billion bond purchases until its August Jackson Hole economic symposium, although it could acknowledge the start of policy discussions. Policymakers will update their economic projections and the market will focus on whether they change their inflation projections and timing for a rate hike. The market will also monitor whether the Fed raises the interest its pays on excess reserves (IOER) and on reverse repurchase agreements (repo) to ease pressure on short-term rates. The two-year Treasury yield was last less than a basis point lower at 0.1631%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last unchanged at 132.23 basis points. June 16 Wednesday 9:55AM New York / 1355 GMT Price Current Net Yield % Change (bps) Three-month bills 0.025 0.0253 0.000 Six-month bills 0.0425 0.0431 0.002 Two-year note 99-237/256 0.1631 -0.004 Three-year note 99-192/256 0.334 -0.008 Five-year note 99-222/256 0.7774 -0.008 Seven-year note 100-112/256 1.1842 -0.010 10-year note 101-64/256 1.4888 -0.010 20-year bond 102-112/256 2.0995 -0.018 30-year bond 104-72/256 2.1794 -0.020 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.75 0.00 spread U.S. 3-year dollar swap 9.50 -0.25 spread U.S. 5-year dollar swap 6.75 -0.25 spread U.S. 10-year dollar swap -3.00 0.00 spread U.S. 30-year dollar swap -32.00 0.00 spread (By Karen Pierog; editing by Barbara Lewis)

Analysis: Hotter inflation fails to shake U.S. markets out of torpor, with Fed in driver's seat

Jun 10 2021

CHICAGO Investors are not freaking out over a spike in U.S. inflation in the past two months, showing confidence that the Federal Reserve is deftly handling a rebound in economic growth even as it leaves markets guessing about how it defines "transitory" when it talks about price increases.

TREASURIES-Yields fall, curve flattens after May jobs report

Jun 04 2021

(Recasts; updates yields, adds analyst comments) By Karen Pierog CHICAGO, June 4 U.S. Treasury yields tumbled and the yield curve flattened on Friday after job gains in May fell short of expectations, calming fears that a roaring economy could lead to a quicker tightening of monetary policy. The benchmark 10-year yield, which had its biggest basis-point drop since April 15, fell to its lowest level since May 26 at 1.557%. It was last 6.8 basis points lower at 1.5585%. The 30-year yield slid as low as 2.233% and was last down 6.1 basis points at 2.2341%. The closely watched yield curve between two- and 10-year Treasury notes flattened with the gap between the yields at its lowest since May 26. It was last 5.71 basis points flatter at 140.78 basis points. The U.S. Labor Department reported that nonfarm payrolls increased last month by 559,000 jobs, which was below the 650,000 job gains economists polled by Reuters had forecast. Data for April was revised slightly higher to show payrolls rising by 278,000 jobs instead of 266,000 as previously reported. The unemployment rate fell to 5.8% from 6.1% in April. "The numbers were decent, but they weren't blow-out numbers," said Andrew Richman, senior fixed income strategist at Sterling Capital Management, pointing to the possibility of a huge job gain after Thursday's ADP National Employment Report showed private payrolls increased by 978,000 jobs in May. Gennadiy Goldberg, interest rate strategist at TD Securities in New York, said the government's jobs report was "not quite good enough" to change the outlook for the U.S. Federal Reserve to taper its bond purchases or hike rates, which should keep rates relatively range-bound in the short term. Meanwhile, the amount of money flowing into the Fed's reverse repurchase facility rose from $479 billion on Thursday to $483 billion on Friday, just under a record $485 billion reached on May 27. A flood of cash is pushing down short-term rates and fueling expectations the Fed will take action to maintain its key policy rate. Looking ahead to next week, the Treasury Department will hold auctions for $58 billion of three-year notes on Tuesday, $38 billion of 10-year notes on Wednesday, and $24 billion of 30-year bonds on Thursday. "On the whole, I think things will go decently, but if rates keep going down here it's just going to be a little bit harder for that to happen," Richman said. The two-year Treasury yield was almost a basis point lower at 0.1507%. The yield on 30-year Treasury Inflation-Protected Securities closed at -0.077%, its lowest closing point since mid-February, according to Tradeweb. June 4 Friday 4:22PM New York / 2022 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0225 0.0228 0.003 Six-month bills 0.04 0.0406 0.003 Two-year note 99-243/256 0.1507 -0.009 Three-year note 99-216/256 0.3034 -0.027 Five-year note 99-216/256 0.782 -0.063 Seven-year note 100-36/256 1.2289 -0.070 10-year note 100-156/256 1.5585 -0.068 20-year bond 101-152/256 2.1512 -0.067 30-year bond 103-16/256 2.2341 -0.061 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.25 -0.50 spread U.S. 3-year dollar swap 11.50 0.00 spread U.S. 5-year dollar swap 7.25 -0.25 spread U.S. 10-year dollar swap -3.25 -0.25 spread U.S. 30-year dollar swap -29.00 0.00 spread (Reporting by Karen Pierog in Chicago Additional reporting by Karen Brettell in New York Editing by Alden Bentley and Matthew Lewis)

TREASURIES-Yields fall after May employment report

Jun 04 2021

By Karen Pierog CHICAGO, June 4 U.S. Treasury yields eased on Friday after the closely watched May employment report fell short of expectations for a bigger job gain, calming fears that a roaring economy could lead to a quicker tightening of monetary policy. The benchmark 10-year yield <US10YT=RR was last down 3.1 basis points at 1.596%. The U.S. Labor Department reported that nonfarm payrolls increased last month by 559,000 jobs, which was below the 650,000 job gain economists polled by Reuters had forecast. Data for April was revised slightly higher to show payrolls rising by 278,000 jobs instead of 266,000 as previously reported. The unemployment rate fell to 5.8% from 6.1% in April. “It’s still a strong number. The way I see it is it's lacking a certain wow factor that the market was expecting, and that can help keep rates a bit lower here and the curve a bit steeper," said Gennadiy Goldberg, interest rate strategist at TD Securities in New York. He added that the data was "not quite good enough" to change the outlook for the U.S. Federal Reserve to taper its bond purchases or hike rates, which should keep rates relatively range bound in the short term. Drew Matus, chief market strategist at MetLife Investment Management, said that, while the report showed an improving labor market, "whether it's sustainable is an open question." "(The report) doesn't provide a definitive answer for people for where the economy is heading one way or another," he said. The two-year Treasury yield was 1.1 basis points lower at 0.1487%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last 2.28 basis points flatter at 144.21 basis points. June 4 Friday 9:35AM New York / 1335 GMT Price Current Net Yield % Change (bps) Three-month bills 0.02 0.0203 0.000 Six-month bills 0.035 0.0355 -0.002 Two-year note 99-244/256 0.1487 -0.011 Three-year note 99-214/256 0.3062 -0.024 Five-year note 99-184/256 0.8077 -0.037 Seven-year note 99-234/256 1.2629 -0.036 10-year note 100-68/256 1.596 -0.031 20-year bond 100-216/256 2.1975 -0.020 30-year bond 102-16/256 2.2795 -0.016 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.00 0.25 spread U.S. 3-year dollar swap 12.00 0.50 spread U.S. 5-year dollar swap 7.50 0.00 spread U.S. 10-year dollar swap -3.00 0.00 spread U.S. 30-year dollar swap -29.25 -0.25 spread (By Karen Pierog; additional reporting by Karen Brettell in New York; editing by Jonathan Oatis)

TREASURIES-Yields rise as market awaits May jobs report

Jun 03 2021

(Recasts; updates yields, adds analyst comments and upcoming auctions) By Karen Pierog CHICAGO, June 3 U.S. Treasury yields, particularly in the belly of the curve, climbed on Thursday in light trading ahead of the government's May employment report. The benchmark 10-year yield was last up 3.4 basis points at 1.625%. Yields on five- and seven-year notes hit two-week highs. The spread between five-year notes and 30-year bonds was last 2.16 basis points flatter at 145.53 basis points. Justin Lederer, Treasury analyst at Cantor Fitzgerald in New York, said yields rose amid low trading volume and improving economic data, but remain range bound. "Data's a little better, but we just don't go anywhere," he said. He added that the U.S. Federal Reserve's statement that it will gradually offload its portfolio of exchange-traded corporate bond funds starting June 7 "was not by any means an announcement of tapering" its government bond purchases. Many analysts expect the Fed to disclose tapering plans at its Jackson Hole economic symposium in August. The market's immediate focus is on the U.S. Labor Department's May employment report due out on Friday. According to a Reuters survey of economists, private payrolls likely increased by 600,000 jobs last month after rising by only 218,000 in April. With government hiring expected to have increased by about 50,000, that would lead to overall payrolls advancing by 650,000 jobs in May. The economy created 266,000 jobs in April. Jim Vogel, senior rates strategist at FHN Financial in Memphis, Tennessee, said the market is looking for a broader picture of where the economy was headed. "Tomorrow's jobs report will be very important, but there'll still be people waiting to see how the (consumer price index) and retail sales numbers come out," he said. Thursday's ADP National Employment Report showed private payrolls increased by 978,000 jobs last month, the biggest increase since June 2020. Data for April was revised down to show 654,000 jobs added instead of the initially reported 742,000. Economists polled by Reuters had forecast private payrolls would increase by 650,000 jobs. The number of new claims for unemployment benefits fell below 400,000 last week for the first time since the COVID-19 pandemic began last year, the Labor Department reported on Thursday. Initial claims fell 20,000 to a seasonally adjusted 385,000 for the week ended May 29. The Institute for Supply Management's (ISM) non-manufacturing activity index rebounded to 64 last month, the highest reading in the series' history, from 62.7 in April. A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index climbing to 63.0. The Treasury Department announced auctions next week for $58 billion of three-year notes, $38 billion of 10-year notes, and $24 billion of 30-year bonds. The amount of money flowing into the Fed's reverse repurchase facility rose to $479 billion on Thursday from $438.7 billion on Wednesday, but remained under a record $485 billion reached on May 27. A flood of cash is pushing down short-term rates and fueling expectations the Fed will take action to maintain its key policy rate. The two-year Treasury yield was 1.3 basis points higher at 0.1604%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last about 2 basis points steeper at 146.11 basis points. June 3 Thursday 3:15PM New York / 1915 GMT Price Current Net Yield % Change (bps) Three-month bills 0.02 0.0203 0.000 Six-month bills 0.0375 0.038 0.003 Two-year note 99-238/256 0.1604 0.013 Three-year note 99-198/256 0.3274 0.024 Five-year note 99-140/256 0.8429 0.047 Seven-year note 99-172/256 1.2993 0.042 10-year note 100 1.625 0.034 20-year bond 100-128/256 2.2188 0.017 30-year bond 101-172/256 2.2974 0.017 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.75 -0.25 spread U.S. 3-year dollar swap 11.50 -0.25 spread U.S. 5-year dollar swap 7.50 -0.50 spread U.S. 10-year dollar swap -3.00 0.00 spread U.S. 30-year dollar swap -28.75 -0.50 spread (By Karen Pierog; Editing by Andrea Ricci and Jonathan Oatis)

TREASURIES-Yields rise after ADP private payrolls data

Jun 03 2021

By Karen Pierog CHICAGO, June 3 U.S. Treasury yields moved higher on Thursday, lifted by a report indicating a big private payrolls jump in May, while the market awaited the government's upcoming release of monthly employment data. The ADP National Employment Report showed private payrolls climbed by 978,000 jobs last month, the biggest increase since June 2020. Data for April was revised down to show 654,000 jobs added instead of the initially reported 742,000. Economists polled by Reuters had forecast private payrolls would increase by 650,000 jobs. The benchmark 10-year yield, was last up 2.9 basis points at 1.6198%. The market's major focus will be on the U.S. Labor Department's May employment report due out on Friday. According to a Reuters survey of economists, private payrolls likely increased by 600,000 jobs last month after rising by only 218,000 in April. With government hiring expected to have increased by about 50,000, that would lead to overall payrolls advancing by 650,000 jobs in May. The economy created 266,000 jobs in April. Jim Vogel, senior rates strategist at FHN Financial in Memphis, Tennessee, said the yield rise came amid low trading volume as the market awaited a broader picture of where the economy was headed. "Tomorrow's jobs report will be very important, but there'll still be people waiting to see how the (Consumer Price Index) and retail sales numbers come out," he said. Meanwhile, the number of new claims for unemployment benefits fell below 400,000 last week for the first time since the COVID-19 pandemic began last year. Initial claims fell 20,000 to a seasonally adjusted 385,000 for the week ended May 29. There was minimal market reaction to a report from the Institute for Supply Management (ISM) that showed non-manufacturing activity index rebounded to 64 last month, the highest reading in the series' history, from 62.7 in April. A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index climbing to 63.0. The two-year Treasury yield was last less than a basis point higher at 0.1565%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was about 2 basis points steeper at 146.16 basis points. June 3 Thursday 10:47AM New York / 1447 GMT Price Current Net Yield % Change (bps) Three-month bills 0.02 0.0203 0.000 Six-month bills 0.035 0.0355 0.001 Two-year note 99-240/256 0.1565 0.009 Three-year note 99-200/256 0.3247 0.022 Five-year note 99-152/256 0.8333 0.037 Seven-year note 99-184/256 1.2922 0.035 10-year note 100-12/256 1.6198 0.029 20-year bond 100-120/256 2.2207 0.019 30-year bond 101-172/256 2.2974 0.017 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.25 0.25 spread U.S. 3-year dollar swap 12.00 0.25 spread U.S. 5-year dollar swap 8.00 0.00 spread U.S. 10-year dollar swap -2.75 0.25 spread U.S. 30-year dollar swap -28.50 -0.25 spread (By Karen Pierog; Editing by Andrea Ricci)

Dip in U.S. Fed funds rate not expected to spur action yet

Jun 01 2021

CHICAGO, June 1 The interest rate banks charge each other for overnight loans eased closer to a record low as May wrapped up on Friday, but the move is unlikely to prompt U.S. Federal Reserve action unless it stays at the lower level.

Fed reverse repo volume hits record high

May 27 2021

(Reuters) -The amount of money flowing into the U.S. Federal Reserve's reverse repurchase (RRP) facility hit an all-time high of $485 billion on Thursday, further pressuring key short-term interest rates, which risk falling below zero.

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