By Karen Brettell
NEW YORK, Aug 14 (Reuters) - Benchmark 10-year U.S.
Treasury yields approached nine-month highs on Monday as
investors weighed expectations that the Federal Reserve has
stopped hiking rates against the prospect of increasing bond
supply.
Trading conditions were thin, however, with many traders and
investors away for summer vacations.
This week’s main U.S. economic focus will be retail sales
data for July, which will be released on Tuesday. It is expected
to show a 0.4% increase in spending during the month.
The Federal Reserve will also release minutes from its July
25-26 meeting on Wednesday.
But there are no major catalysts that are likely to bring
further clarity on Fed policy until future inflation reports and
when Fed officials give their interest rate projections for the
coming quarters at the central bank's Sept. 19-20 meeting.
The Federal Reserve Bank of Kansas City’s annual symposium
in Jackson Hole, Wyo., on Aug. 24-26 could also bring new
clarity on Fed thinking.
Inflation has moderated in recent months, though it remains
above the U.S. central bank’s 2% annual target, and solid
economic data has defied market expectations of a near-term
recession.
Higher rates are tightening credit conditions, however,
which analysts say will eventually feed through to slowing
growth and dwindling price pressures.
“Core inflation is going to creep lower and it’s going to
make it hard for the Fed to keep tightening,” said Tom di
Galoma, managing director and co-head of global rates trading at
BTIG in New York.
Fed funds futures traders are pricing in a less than 50%
chance of a 25 basis points hike at the Fed's November meeting,
and see the U.S. central bank as most likely to begin cutting
rates in May.
Increasing Treasury supply is expected to pull Treasury
yields higher than they would otherwise be, and counteract some
of the impact of slowing growth. But increases are expected to
be gradual enough to not cause any major market disruptions in
the short-term.
Yields rose after the Treasury Department saw soft demand
for a 30-year bond auction on Thursday, though the government
saw solid interest in three-year and 10-year notes last week as
part of its $103 billion refunding.
Benchmark 10-year yields rose two basis points
on the day to 4.187%. They are holding just below the 4.206%
level reached on Aug. 4, which was the highest since Nov. 8.
Two-year yields gained five basis points to
4.948%. The interest rate-sensitive notes are holding below
yields of 5.120% reached on July 6, which were the highest since
June 2007.
The inversion in the closely-watched yield curve between
two- and 10-year notes deepened to minus 76 basis
points.
August 14 Monday 9:30AM New York / 1330 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 5.2925 5.4496 0.018
Six-month bills 5.27 5.5004 0.012
Two-year note 99-162/256 4.9478 0.053
Three-year note 99-74/256 4.6315 0.050
Five-year note 99 4.351 0.043
Seven-year note 98-66/256 4.292 0.033
10-year note 97-120/256 4.1874 0.019
20-year bond 92-72/256 4.4669 0.011
30-year bond 97-96/256 4.2812 0.009
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 0.00 0.00
spread
U.S. 3-year dollar swap 0.00 0.00
spread
U.S. 5-year dollar swap 0.00 0.00
spread
U.S. 10-year dollar swap 0.00 0.00
spread
U.S. 30-year dollar swap 0.00 0.00
spread
(Reporting by Karen Brettell; Editing by Emelia
Sithole-Matarise)
TREASURIES-Benchmark yields approach nine-month high, US retail sales main focus
August 14, 2023 at 02:47 pm
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