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TREASURIES-U.S. yields rise as 10-year on pace for largest monthly gain since '09

TREASURIES-U.S. yields rise as 10-year on pace for largest monthly gain since '09

reuters.com · 04/29/2022 09:39
TREASURIES-U.S. yields rise as 10-year on pace for largest monthly gain since '09

By David Randall

- Yields of benchmark Treasuries capped off their biggest monthly gain since December 2009 by rising near their highest levels of the year following data that showed that monthly inflation surged by the largest amount since 2005 in March.

The yield on 10-year Treasury notes US10YT=RR was up 4.3 basis points to 2.906%, while the yield on the 30-year Treasury bond US30YT=RR was up 2.4 basis points to 2.953%.

Benchmark 10-year Treasuries are on track to rise 109 basis points over the last two months, the largest such gain since March 1994.

Strong consumer spending helped push yields higher and dampen concerns about a slowdown in the U.S. economy. The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged 1.1% last month, well above the 0.7% increase expected by economists polled by Reuters. L2N2WQ2K0

The personal consumption expenditures (PCE) price index, meanwhile, rose 0.9% in March, the largest gain since 2005, after climbing 0.5% in February. The PCE price index jumped 6.6% over the 12 months ending in March, the largest annual gain since 1982.

The strong economic numbers may lead to a more hawkish response from the Federal Reserve, said Ian Lyngen, head of U.S. Rates Strategy at BMO Capital Markets.

"The operating assumption in the market at the moment is that the Fed has sufficient flexibility to ratchet up the pace of hiking in response to any further acceleration of inflationary pressures," he said.

The central bank is widely expected to raise interest rates by 50 basis points at its meeting next week.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=RR, seen as an indicator of economic expectations, was at 17.7 basis points.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 8.6 basis points at 2.733%.

(Reporting by David Randall
Editing by Nick Zieminski)

((David.Randall@thomsonreuters.com; 646-223-6607; Reuters Messaging: david.randall.thomsonreuters.com@reuters.net))