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TREASURIES-Yields rise on hawkish ECB, Treasury to sell 30-year bonds

reuters.com · 06/09/2022 09:34
TREASURIES-Yields rise on hawkish ECB, Treasury to sell 30-year bonds

By Karen Brettell

- U.S. Treasury yields rose on Thursday after the European Central Bank (ECB) signaled a series of upcoming rate hikes and before the U.S. Treasury Department sells 30-year bonds.

The ECB said it will end bond purchases on July 1 then raise interest rates by 25 basis points later that month. It will hike again in September and may opt for a bigger move then if inflation continues to surprise. nL1N2XW0AB

“The market read the ECB as a little bit hawkish. The July hike with maybe a larger hike in September and then more to follow I think has pushed yields higher,” said Ben Jeffery, an interest rate strategist at BMO Capital Markets in New York.

Two-year yields US10YT=RR, which are highly sensitive to interest rate moves, increased to 2.824% and benchmark 10-year note yields US10YT=RR reached 3.073%, both the highest since May 11.

The yield curve between two-year and 10-year yields US2US10=TWEB was little changed at 24 basis points, after earlier flattening to 22 basis points, which was the smallest yield gap since May 25.

The U.S. Federal Reserve is expected to raise rates by 50 basis points at its June meeting next week and again in July, with a similar move also likely in September. FEDWATCH

Treasury supply has sent yields higher this week, while investors are also focused on data on Friday that is expected to show that consumer prices remained elevated in May.

“We’ve seen significant selling in Treasuries this week going into supply as well as tomorrow’s inflation data,” Jeffery said.

The U.S. Treasury Department will sell $19 billion in 30-year bonds on Thursday, the final sale of $96 billion in coupon-bearing issuance this week.

The government saw soft demand for a $33 billion sale of 10-year notes on Wednesday and a $44 billion auction of three-year notes on Tuesday. nAQN15791I nAQN155ZWH

Inflation data on Friday is expected to show that consumer prices rose 0.7% in May, while the core consumer price index (CPI), which excludes the volatile food and energy sectors, rose 0.5% in the month. USCPI=ECI, USCPF=ECI

Data on Thursday showed that the number of Americans filing new claims for unemployment benefits increased more than expected last week, but remained at a level consistent with a tight labor market. nL1N2XV20Y


June 9 Thursday 9:11AM New York / 1311 GMT


Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

1.2575

1.279

0.015

Six-month bills US6MT=RR

1.7525

1.7926

0.023

Two-year note US2YT=RR

99-99/256

2.8216

0.048

Three-year note US3YT=RR

99-162/256

3.0039

0.044

Five-year note US5YT=RR

97-234/256

3.0805

0.048

Seven-year note US7YT=RR

97-204/256

3.1037

0.042

10-year note US10YT=RR

98-108/256

3.0603

0.031

20-year bond US20YT=RR

97-100/256

3.4317

0.030

30-year bond US30YT=RR

93-204/256

3.1985

0.020





DOLLAR SWAP SPREADS




Last (bps)

Net Change (bps)


U.S. 2-year dollar swap spread

36.25

1.75


U.S. 3-year dollar swap spread

18.75

1.75


U.S. 5-year dollar swap spread

5.00

0.25


U.S. 10-year dollar swap spread

6.75

-0.25


U.S. 30-year dollar swap spread

-23.25

-1.00



((karen.brettell@thomsonreuters.com))