Yields creep higher as debt ceiling, inflation worries fester

Yields creep higher as debt ceiling, inflation worries fester

27 Apr    Finance News, PMN Business, REU

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NEW YORK — Treasury yields moved

higher across the board Thursday as investors weighed a coming

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showdown over the U.S. debt ceiling with economic data that

suggested inflation could remain sticky despite a slowing

economy.

The yield of one-month Treasury bills rose 10 basis points

to 3.86% a day after the U.S. House of Representatives narrowly

passed a bill that would raise the debt limit in exchange for

sweeping spending cuts. The bill is not expected to pass the

Senate.

The Treasury Department would no longer be able to all of

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its bills if an agreement is not reached by early summer.

Longer duration yields crept higher following data from the

Commerce Department showing that gross domestic product rose at

an 1.1% annualized rate in the first quarter, below the 2% rate

expected by economists polled by Reuters.

Still, consumer spending grew at a faster pace than

expected, while jobless claims fell to 230,000 from 246,000 the

prior week, suggesting that household spending remains strong

despite the Federal Reserve’s most aggressive rate hiking cycle

since the early 1980s.

The central bank is widely expected to raise benchmark rates

by 25 basis points at its policy meeting next week.

Following Thursday’s data reports, investors are now pricing

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in a nearly 30% chance that the central bank raises rates by

another 25 basis points at its June meeting, up from a 14%

chance seen the day before.

“The inflation print is driving the lion’s share” of trading

activity Thursday, said Benjamin Jeffrey, U.S. Rates strategist

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at BMO Capital Markets.

The yield on 10-year Treasury notes was up 5.1

basis points to 3.481%, while the yield on the 30-year Treasury

bond was up 4.1 basis points to 3.730%.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations, was up 10.9 basis

points at 4.033%.

April 27 Thursday 8:53AM New York / 1253 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 5.035 5.17 0.027

Six-month bills 4.8275 5.03 0.034

Two-year note 99-184/256 4.0229 0.099

Three-year note 100 3.7496 0.082

Five-year note 99-220/256 3.5309 0.066

Seven-year note 100-172/256 3.5145 0.058

10-year note 100-36/256 3.4825 0.053

20-year bond 100-100/256 3.8463 0.040

30-year bond 98-28/256 3.7304 0.041

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 29.50 -1.75

spread

U.S. 3-year dollar swap 17.00 -1.25

spread

U.S. 5-year dollar swap 7.75 0.50

spread

U.S. 10-year dollar swap -0.50 -0.50

spread

U.S. 30-year dollar swap -42.25 0.00

spread

(Reporting by David Randall, Editing by Nick Zieminski)

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