CASH – US yields slide from overall mixed highs after inflation data
By Gertrude Chavez-Dreyfuss and Yoruk Bahceli
NEW YORK / LONDON, August 11 (Reuters) – U.S. Treasury yields slipped from their highs on Wednesday in choppy trading, with 10-year yields falling from four-week highs, after data showed a slight moderation in consumer prices for July in the largest economy in the world.
Overall, returns were mixed, with long-term ones slightly higher on the same day and shorter ones lower.
The yield curve, an indicator of economic sentiment and rate expectations, flattened to 110.80 basis points, as measured by the spread between two-year and 10-year rates US2US10 = TWEB. This curve had been accentuated during the four previous sessions.
U.S. yields were much higher ahead of the inflation data, bolstered by comments from two Federal Reserve officials on Tuesday, suggesting that the central bank may soon cut or decrease its asset purchases. Tapering tends to lower Treasury debt prices and raise yields, because it means the Fed is buying less of these bonds.
Consumer price increases in the United States slowed in July, but inflation overall remained at historically high levels. The consumer price index rose 0.5% last month after rising 0.9% in June. Excluding the volatile components of food and energy, the CPI rose 0.3% after increasing 0.9% in June.
“In the end, this is a more moderate reading than expected, especially on the core, and that was driven by rents and rents were the big concern… if rents started to accelerate you would definitely see some worry, “said Gennadiy Goldberg, senior rate strategist at TD Securities in New York.
“But it doesn’t look like that is happening at the moment and I think it will make the Fed a little more confident that it can let inflation rise a little higher in the near term without having to worry about the overshoot. and having to tighten quickly enough to stop inflation, ”he added.
The additional spending hinted at by President Joe Biden’s infrastructure plans could further complicate the inflation outlook, however, said Jens Peter Sorensen, chief analyst at Danske Bank.
The US Senate passed a massive infrastructure bill on Tuesday and kicked off debate on a $ 3.5 trillion additional spending plan for climate change, universal preschool education and affordable housing.
The yield on 10-year treasury bills US10YT = RR remained unchanged at 1.342%. Earlier in the session, the 10-year yield hit a four-week high of 1.378%
The yield of the 30-year Treasury bill US30YT = RR increased 1.6 basis points to 2,000%.
The two years US2YT = RR The yield on the US Treasury fell 1 basis point to 0.229%.
TIPS breakeven point at 10 years US10YTIP = RR, the average expected inflation per year for the next decade, was the latest at 2.385%, down slightly from Tuesday’s 2.391%.
Later Wednesday, the US Treasury will auction $ 41 billion in 10-year US notes. This will follow a strong sell-off of US 3-year banknotes which has been boosted by falling bond prices and continued demand for safe-haven securities amid soaring cases of the virus around the world.
Aug 11 Wednesday 9:29 am New York / 1329 GMT
Net change (bp)
Three-month invoices US3MT = RR
Six-month invoices US6MT = RR
Two year note US2YT = RR
99-204 / 256
Three year note US3YT = RR
99-194 / 256
Five year note US5YT = RR
99-24 / 256
Seven year note US7YT = RR
99-56 / 256
10 year note US10YT = RR
102-152 / 256
20-year bond US20YT = RR
105-180 / 256
30-year bond US30YT = RR
108-100 / 256
DOLLAR EXCHANGE DIFFERENCES
Net change (bp)
2-year US dollar swap spread
3-year US dollar swap spread
5-year US dollar swap spread
10-year US dollar swap spread
30-year US dollar swap spread
(Reporting by Gertrude Chavez-Dreyfuss in New York and Yoruk Bahceli in London; Additional reporting by Karen Brettell in New York; Editing by Sujata Rao and David Evans)
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