0 Minutes Read (Updates prices; adds Fed minutes)
Chuck Mikolajczak contributed to this article.
Reuters, NEW YORK, July 7 – On Wednesday, U.S. Treasury rates continued to fall, with 10-year yields on course for their seventh straight session of drops, as investors looked for clues to the Federal Reserve’s policy path in the minutes from its June meeting.
The 10-year note’s losing streak is the longest since a nine-session slide that concluded on March 3, 2020, just as the COVID-19 outbreak in the United States was getting traction.
Recent labor market and services sector data have given investors pause, indicating that the economy may not be strengthening as quickly as expected, and that some underlying weakness may be forming.
The Labor Department reported on Wednesday that job postings increased in May but hiring decreased, showing that the economy is still dealing with labor shortages.
Concerns over the spread of the Delta strain of the coronavirus, as well as instability in the oil market, where crude enjoyed a run-up in price until collapsing on Tuesday after OPEC producers postponed a meeting, added to the risk-off climate, analysts said. A market that had been extensively shorted and a break on Tuesday of technical support levels on the 10-year were also blamed for the drop.
“It’s a little bit of everything,” said Eric Souza, senior portfolio manager at SVB Asset Management. “Short squeeze, Delta variations, lack of supply, asset liability, and historical tapering equal lower rates.”
The yield on 10-year Treasury notes fell 4.9 basis points to 1.321 percent after hitting a low of 1.296 percent earlier in the day, the lowest since February 19.
“At a few of levels this morning, we broke 1.3 percent twice. It bounced when it got to those levels. Holding the 1.30 handle is a wager that the markets will most likely want to see “Souza stated.
The Fed’s June 15-16 meeting minutes revealed that officials believed “significant further progress” on the economic recovery had still to be made, but that they needed to be ready to act if inflation or other threats arose.
After flattening to as low as 107.3 basis points, a frequently monitored section of the US Treasury yield curve measuring the gap between rates on two- and 10-year Treasury notes, viewed as a sign of economic forecasts, was at 110.4 basis points, the smallest since Feb 12.
The 10-year yield’s break below 1.40 percent, according to market participants, was critical in luring more bond purchasers because that was the level at which many had hedged their “reflation” bets.
After plummeting to a low of 1.918 percent on February 11, the 30-year Treasury note yield was down 6.3 basis points to 1.940 percent.
Wednesday, July 7th, 2:33 p.m. in New York / 1833 p.m. in GMT
Price
T BONDS IN THE U.S. SEP1 133-136/256 0-80/256 10YR TNotes SEP1 163-9/32 1-6/32 10YR TNotes SEP1 163-9/32 1-6/32 10YR TNotes SEP1 133-136/256 0-80/256
Price Percentage Change in Current Net Yield (bps)
Bills for three months 0.0525 0.0532 0.000 0.0525 0.0532 0.000 0.0525 0.0532
0.055 0.0558 0.003 0.055 0.0558 0.003 0.055 0.0558 0.003 0.055 0.0558
Note 99-210/256 with a two-year maturity 0.006 0.006 0.006 0.006 0.006 0.006 0.006
Note 99-144/256 with a three-year maturity 0.011 0.011 0.011 0.011 0.011 0.011
Note with a five-year maturity of 100-112/256 0.024 -0.7852 -0.7852 -0.7852 -0.7
Note 101-8/256 with a seven-year term 1.0961 -0.036 -0.036 -0.036 -0.036 –
30-year bond 109-208/256 1.9404 -0.063 10-year note 102-204/256 1.3213 -0.049 10-year note 102-204/256 1.3213 -0.049
SWAP DOLLAR SPREADS
Finally (bps) Change in the net (bps)
8.00 0.00 spread on a two-year dollar swap in the United States
The spread on a three-year dollar swap in the United States is 11.75 percent.
8.00 0.75 spread on a 5-year dollar swap in the United States
-2.00 0.50 spread on a 10-year dollar swap in the United States
-30.50 1.00 spread on a 30-year dollar swap in the United States
(Karen Brettell contributed additional reporting; Toby Chopra and Leslie Adler edited the piece.)/n
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