0 Minutes Read (Updates prices, adds stock market moves)
Chuck Mikolajczak contributed to this article.
Reuters, NEW YORK, July 8 – On Thursday, 10-year Treasury yields fell to their lowest levels in over five months, as investors’ fears that the best part of the economic recovery may be over grew.
The yield on the 10-year note is on track to fall for an eighth consecutive session, the longest run since a nine-session decrease that ended on March 3, 2020, as the COVID-19 pandemic in the United States gained 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.
Initial jobless claims unexpectedly increased for the week on Thursday, according to Labor Department data, though the overall trend continues to improve.
The difference between the rates on two- and 10-year Treasury notes, which is seen as a measure of economic forecasts, was at 108.9 basis points after falling to as low as 104.2 basis points, the smallest since Feb. 12.
“The market is asking whether the Fed will be able to make additional progress on employment in order to achieve its mandate before reducing asset purchases,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.
“The market is pricing in the timing of the first rate hike, as well as the speed of subsequent rate hikes, which has resulted in Treasuries flattening.”
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.
The Delta variation of COVID-19, volatility in oil prices, and a market that has been predominantly positioned short have all been highlighted by analysts as grounds for growing concerns about economic growth prospects and increased risk-off attitude.
After hitting a low of 1.25 percent on Feb. 16, the yield on 10-year Treasury notes fell 3.5 basis points to 1.286 percent.
Concerns expanded to the stock market, with each of the three major averages falling in a broad sell-off, with financials and industrials, which are considered part of the “reflation” trade, doing the worst on the day.
The 30-year Treasury note yield fell 3.4 basis points to 1.910 percent after falling to 1.856 percent, its lowest level since February 2.
Thursday, July 8th, 2:46 p.m. in New York / 1846 p.m. in GMT
Price
T BONDS IN THE U.S. SEP1 163-31/32 0-22/32 10YR SEP1 163-31/32 0-22/32 10YR SEP1 163-31/ TNotes SEP1 0-84/256 133-224/256 TNotes SEP2 0-84/256 TNotes SEP3 0-84/256
Price Percentage Change in Current Net Yield (bps)
0.0525 0.0532 0.000 0.0525 0.0532 0.000 0.0525 0.0532 0.000 0.0525 0.0532
0.05 0.0507 -0.005 0.05 0.0507 -0.005 0.05 0.0507 -0.005 0.05 0.0507
99-221/256 0.1944 -0.022 -0.022 -0.022 -0.022 -0.022 -0.022 -0.022 –
99-176/256 0.3571 -0.040 -0.040 -0.040 -0.040 -0.040 -0.040 -0.040 -0.0
Note with a five-year maturity of 100-174/256 0.044 -0.7356 -0.7356 -0.7356 -0.7
Note 101-80/256 with a seven-year term -1.0543 +0.039
103-32/256 is a ten-year note with a face value of $10,000. 1.2862 -0.035 -0.035 -0.035 -0.035 –
110-140/256 1.9098 -0.034 30-year bond 110-140/256 1.9098 -0.034
SWAP DOLLAR SPREADS
Finally (bps) Change in the net (bps)
8.00 0.25 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 0.25 spread on a 5-year dollar swap in the United States
-1.25 1.00 spread on a 10-year dollar swap in the United States
-29.25 2.00 spread on a 30-year dollar swap in the United States
(Karen Brettell contributed additional reporting; Mark Heinrich and Andrew Heavens edited the piece.)/n
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