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TREASURIES-Yields mixed as Fed keeps rates steady

TREASURIES-Yields mixed as Fed keeps rates steady

· 03/17/2021 15:15
TREASURIES-Yields mixed as Fed keeps rates steady

Recasts, updates yields, adds analyst comments

By Karen Pierog and Yoruk Bahceli

- U.S. Treasuries yields on the longer end of the curve remained elevated and shorter-term yields fell on Wednesday after the Federal Reserve projected a big jump in economic growth with no interest rate hikes through 2023.

The benchmark 10-year yield US10YT=RR, which surged to 1.689%, the highest level since January 2020 ahead of the Fed's statement, was last up less than a basis point at 1.6304%.

The 30-year bond yield, which jumped to a new session high of 2.464%, the highest since August 2019, after the statement's release, was last up 4.4 basis points at 2.4347%.

The U.S. central bank projected a rapid jump in U.S. economic growth and inflation this year as the COVID-19 crisis winds down, and repeated its pledge to keep its target interest rate near zero for years to come. nL1N2LE1D0

"There's no indication that the Fed is preparing to act on rising inflation or the stronger economy we've been seeing," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.

She pointed out that long-term yields might have had "a knee-jerk reaction" move higher due to an increasing number - but still not the majority - of Federal Open Market Committee members eyeing a rate hike in 2022 or 2023.

On the short end of the curve, yields on Treasury bills maturing in one, two, and three months fell earlier in the session to their lowest levels since March 2020, with the one-month yield sinking as low as 0.0100% and the three-month yield hitting 0.0150%.

The two-year Treasury yield US2YT=RR, which typically moves in step with interest rate expectations, was last 2.2 basis points lower at 0.129%.

The eurodollar futures market, which tracks short-term rate expectations, has pared back bets on an interest rate hike by December 2022. It has priced in so far a 90% chance of tightening by March 2023 and just two hikes by for the whole of that year, compared with three before the Fed statement.

A closely watched part of the yield curve, which measures the gap between yields on two- and 10-year Treasury notes US2US10=RR, steepened by 3.77 basis points to 150.64 basis points.


March 17 Wednesday 3:02PM New York / 2002 GMT


Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.0175

0.0177

0.000

Six-month bills US6MT=RR

0.0475

0.0482

-0.003

Two-year note US2YT=RR

99-254/256

0.129

-0.022

Three-year note US3YT=RR

99-232/256

0.2815

-0.052

Five-year note US5YT=RR

98-176/256

0.7707

-0.053

Seven-year note US7YT=RR

99-44/256

1.2497

-0.026

10-year note US10YT=RR

95-100/256

1.6304

0.007

20-year bond US20YT=RR

92-208/256

2.328

0.029

30-year bond US30YT=RR

88-40/256

2.4347

0.044





DOLLAR SWAP SPREADS




Last (bps)

Net Change (bps)


U.S. 2-year dollar swap spread

11.00

0.50


U.S. 3-year dollar swap spread

11.75

1.75


U.S. 5-year dollar swap spread

10.25

2.25


U.S. 10-year dollar swap spread

1.25

1.25


U.S. 30-year dollar swap spread

-30.25

1.00







(Reporting by Karen Pierog in Chicago and Yoruk Bahceli in Amsterdam; additional reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Iain Withers, Nick Zieminski and Jonathan Oatis)

((karen.pierog@thomsonreuters.com; +1 312 408 8647; Reuters Messaging: karen.pierog.thomsonreuters.com@reuters.net))