Yields steady before inflation data, supply

Yields steady before inflation data, supply

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NEW YORK — Treasury yields were little

changed on Tuesday as investors awaited consumer price inflation

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data on Wednesday for clues on whether inflation is continuing

to ease, and before the U.S. Treasury Department will sell new

three-year notes.

The consumer price data for April is this week’s main U.S.

economic focus, but investors are also trying to gauge whether

the worst of the U.S. regional banking crisis has passed and if

Congress will raise the debt ceiling in time to avoid a default.

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Once the debt ceiling issue and volatility around regional

banks are resolved “it might be a cleaner read heading into the

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June meeting on economic fundamentals and what the Fed will do,”

said Subadra Rajappa, head of U.S. rates strategy at Societe

Generale in New York.

“The most likely scenario is that they’ll keep policy on

hold,” Rajappa added.

Ebbing inflation and concerns over regional banks and the

debt ceiling are seen as likely to lead the Federal Reserve to

pause rate hikes in June, but a surprise increase in price

pressures could disrupt this view. The inflation report for May

will also be due just before the U.S. central bank’s June

meeting.

Wednesday’s data is expected to show that headline consumer

prices rose at an annual rate of 5.0% in April, while core

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prices gained by 5.5%.

Fed funds futures traders are pricing in a 92% probability

that the Fed will keep rates unchanged in June, and a 8%

likelihood that it will raise rates by another 25 basis points.

Benchmark 10-year yields fell one basis point to

3.505% and two=year yields were up by around half a

basis point at 4.018%.

The inversion in the yield curve between two-year and

10-year notes deepened by around two basis points

to minus 51 basis points.

The Treasury will sell $40 billion in three-year notes on

Tuesday, the first sale of $96 billion in coupon-bearing supply

this week. It will also sell $35 billion in 10-year notes on

Wednesday and $21 billion in 30-year bonds on Thursday.

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May 9 Tuesday 9:50AM New York / 1350 GMT

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Price Current Net

Yield % Change

(bps)

Three-month bills 5.115 5.2547 0.001

Six-month bills 4.9075 5.1162 0.008

Two-year note 99-187/256 4.0179 0.006

Three-year note 100-18/256 3.7237 0.000

Five-year note 100-12/256 3.4895 -0.008

Seven-year note 100-16/256 3.4897 -0.011

10-year note 99-244/256 3.5053 -0.014

20-year bond 99-136/256 3.9089 -0.014

30-year bond 96-128/256 3.8227 -0.011

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 21.75 -1.25

spread

U.S. 3-year dollar swap 13.50 -0.75

spread

U.S. 5-year dollar swap 8.75 -0.25

spread

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

spread

U.S. 30-year dollar swap -43.75 -0.25

spread

(Reporting by Karen Brettell; editing by Barbara Lewis)

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