* U.S. yield curve steeper as rates rise
* Fed's Powell says will pare bond buys first before raising
rates
* U.S. overnight rate fell as low as -0.05%
* Fed's reverse repo window soaks up more than $50 bln in
cash
(Adds overnight repo rate, Fed's reverse repo operations)
By Karen Pierog
CHICAGO, April 14 (Reuters) - U.S. Treasury yields edged
higher and the yield curve steepened on Wednesday as the market
awaited Thursday's release of weekly jobless claims and March
retail sales data for further clues on the economy's recovery
from the coronavirus pandemic.
The benchmark 10-year yield was last up at
1.6341%, holding below a 14-month high of 1.776% reached on
March 30.
The rise in yields followed Tuesday's tumble in the wake of
a strong 30-year bond auction.
Michael Lorizio, senior fixed income trader at Manulife
Investment Management in Boston, said, "It makes sense to see
some giveback after this strength that we've seen basically
across the entire curve" in the face of better-than-expected
economic data and $120 billion in bond and note supply that hit
the market in auctions this week.
On Thursday, the market will weigh the latest weekly initial
jobless claims, which are expected to fall to 700,000 for the
week ended April 10 from 744,000 in the prior week. Also on tap
is a U.S. Commerce Department report on retail sales, which is
expected to show a 5.9% jump in March after falling 3% in
February, according to a Reuters poll.
"If retail sales beats the upside, it would make intuitive
sense it should be a bearish influence on U.S. Treasuries for
sure, but I think there's expectations for this accelerating
economy that much of the market is already positioned for to
some degree," Lorizio said.
Meanwhile, yields were largely unmoved by comments from
Federal Reserve Chair Jerome Powell and other central bank
officials on Wednesday.
In remarks to the Economic Club of Washington, Powell
clarified the order of monetary policy changes still months, if
not years, away, saying the Fed will reduce its monthly bond
purchases before it commits to an interest rate increase.
Dallas Federal Reserve Bank President Robert Kaplan said the
central bank should reduce its "extraordinary measures ... at
the first opportunity once we've reached, and are reaching, some
of these benchmarks." Those include the weathering of the
pandemic and progress toward full employment and 2% inflation.
As for inflation, New York Fed President John Williams said
it could be volatile in the near term and that the central bank,
which has a target of 2%, knows how to act if it gets too high.
The Fed also released its Beige Book, a collection of
anecdotes about the economy from the central bank's 12 regional
districts, which indicated the economic recovery accelerated to
a moderate pace from late February to early April.
The two-year Treasury yield was last less than a
basis point higher at 0.163%.
A closely watched part of the yield curve that measures the
gap between yields on two- and 10-year Treasury notes
was last 1.40 basis points steeper at 147.11 basis
points.
In the overnight repo market, the rate fell as low as
-0.05%, according to traders, ending the trading day at 0%
.
The low rates pushed investors to lend cash to the Fed via
its reverse repo window, with $50.8 billion in cash on
Wednesday. In total the Fed's reverse repo operations have
mopped up about $118 billion in excess cash so far this week.
April 14 Wednesday 4:28PM New York / 2028 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.02 0.0203 0.000
Six-month bills 0.04 0.0406 0.000
Two-year note 99-237/256 0.163 0.002
Three-year note 100-14/256 0.3567 0.006
Five-year note 99-122/256 0.858 0.018
Seven-year note 99-160/256 1.3065 0.018
10-year note 95-96/256 1.6359 0.013
20-year bond 94-152/256 2.2131 0.018
30-year bond 90-152/256 2.3132 0.005
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 11.50 0.00
spread
U.S. 3-year dollar swap 12.00 0.25
spread
U.S. 5-year dollar swap 8.50 -1.00
spread
U.S. 10-year dollar swap -1.00 -1.75
spread
U.S. 30-year dollar swap -26.75 -2.75
spread (Reporting by Karen Pierog in Chicago; Additional reporting by
Gertrude Chavez-Dreyfuss; Editing by Jan Harvey, Matthew Lewis
and Jonathan Oatis)
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