(Updates throughout, changes byline)
By Chuck Mikolajczak
NEW YORK, July 7 (Reuters) - U.S. Treasury yields
continued their recent falls on Wednesday, with 10-year
yields on track for a seventh straight session of declines on
concerns the economic recovery may have peaked as investors
awaited clues on the Federal Reserve's policy path.
The daily streak of declines for the 10-year note marks
the longest since a nine-session drop that ended on March 3,
2020, as the COVID-19 pandemic in the U.S. was gaining speed.
Recent data on the labor market and services sector has
given investors pause that the economy may not be
strengthening as anticipated and some underlying weakness may
be emerging.
On Wednesday, the Labor Department said job openings
moved higher in May while hiring dipped, indicting the
economy continues to struggle with labor shortages.
"Expectations for growth, for employment and for
inflation were all really, really optimistic and now, for
whatever reason, there seems to be this reckoning that
expectations were a little bit too high, especially on the
labor market front," said Tom Simons, money market economist
at Jefferies in New York.
"There's this expectation that maybe we've already seen
the best part of the recovery and that the rest of this is
going to be a slow grind as businesses try to figure out how
to do more with less in terms of people, how to become more
productive."
Analysts also pointed to volatility in the oil market,
where crude had run up in price until faltering on Tuesday
after OPEC producers canceled a meeting and worries about the
spread of the Delta variant of the coronavirus as
contributing to the risk-off environment, while technical
support levels on the 10-year being broken on Tuesday were
also cited for the decline.
The yield on 10-year Treasury notes was down
6.2 basis points to 1.308%.
Investors will eye the release of minutes from the Fed's
June 15-16 meeting later in the session, when officials
opened debate on how to end crisis-era bond-buying and
signaled interest rate increases were closer on the horizon
than previously thought.
A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 108.600 basis points after flattening to
as small as 107.3, the narrowest since Feb 12.
Market players said the 10-year yield's breach below
1.40% had been crucial in attracting more bond buyers as that
was the level where many had hedged their "reflation" bets.
The yield on the 30-year Treasury bond was
down 7.5 basis points to 1.928% after falling to a low of
1.918%, its lowest since Feb. 11.
July 7 Wednesday 10:53AM New York / 1453 GMT
Price
US T BONDS SEP1 163-19/32 1-16/32
10YR TNotes SEP1 133-152/256 0-96/256
Price Current Net
Yield % Change
(bps)
Three-month bills 0.0525 0.0532 0.000
Six-month bills 0.0525 0.0532 0.000
Two-year note 99-208/256 0.22 -0.002
Three-year note 99-140/256 0.4053 -0.006
Five-year note 100-110/256 0.7868 -0.022
Seven-year note 101-24/256 1.0868 -0.045
10-year note 102-236/256 1.3079 -0.062
30-year bond 110-28/256 1.928 -0.075
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 7.75 -0.25
spread
U.S. 3-year dollar swap 11.50 -0.25
spread
U.S. 5-year dollar swap 7.00 -0.25
spread
U.S. 10-year dollar swap -2.75 -0.25
spread
U.S. 30-year dollar swap -32.00 -0.50
spread
(Additional reporting by Karen Brettell; Editing by Toby
Chopra)
