(Updates prices, adds auction results, Waller comments)
By Chuck Mikolajczak
NEW YORK, May 13 (Reuters) - U.S. Treasury yields were lower
on Thursday, with longer-dated yields falling after four
straight days of gains even as a reading on inflation came in
higher than expected, while weekly initial jobless claims fell
more than anticipated.
The Labor Department said its producer price index for final
demand rose 0.6% in April, hotter than expectations calling for
a rise of 0.3% but less than the 1% jump the prior month.
For the 12 months through April, PPI is up 6.2%, the biggest
year-over-year climb since the series was overhauled in 2010.
Weekly initial jobless claims rose less than expected.
The PPI comes on the heels of Wednesday's reading on
consumer prices, which showed the biggest increase in nearly 12
years in April.
"Investors are looking and saying, this is just one month's
data - is this going to be the trend? But the Fed is sticking to
their mantra that any inflation we see short term is going to be
transitory, it is going to be temporary, it is part of the
reopening," said Eric Souza, senior portfolio manager at SVB
Asset Management.
"That is probably what the market is reassessing."
Federal Reserve officials have repeatedly maintained they
expect any rise in inflation to be short-lived.
On Thursday, Richmond Fed President Thomas Barkin was the
latest to downplay the likelihood of a long-term jump in
inflation.
In addition, Fed Governor Christopher Waller said he expects
inflation to exceed the central bank's target of 2% for the next
two years, but the Fed would not move to raise rates until
inflation is above target for a long time, or excessively high.
The yield on 10-year Treasury notes was down 3.2
basis points to 1.671% after climbing to a high of 1.707%, its
highest since April 6.
Yields moved off their lows in the wake of a $27 billion
sale of 30-year bonds went poorly, according to analysts, with a
high yield of 2.395%, almost 2 basis points above the yield at
the bidding deadline and in contrast to a strong auction of $41
billion in 10-year notes on Wednesday.
Some market participants have downplayed economic data,
noting that year-over-year comparisons are extreme due to the
severe economic shutdown that began in March 2020.
The yield on the 30-year Treasury bond was down
1 basis points to 2.406%.
The breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) was last at
2.685% after closing at 2.731% on Wednesday, its highest close
since April 2011.
The 10-year TIPS breakeven rate was last at
2.543%, indicating the market sees inflation averaging 2.5% a
year for the next decade.
The overnight repo rate, which measures short-term
borrowing costs, fell to 0% for the first time since April 28,
from 0.01% on Wednesday.
May 13 Thursday 2:32PM New York / 1832 GMT
Price
US T BONDS JUN1 156-1/32 0-14/32
10YR TNotes JUN1 132-44/256 0-64/256
Price Current Net
Yield % Change
(bps)
Three-month bills 0.0125 0.0127 -0.002
Six-month bills 0.03 0.0304 -0.003
Two-year note 99-240/256 0.1569 -0.010
Three-year note 99-190/256 0.3366 -0.020
Five-year note 99-150/256 0.8354 -0.029
Seven-year note 99-152/256 1.3112 -0.032
10-year note 99-148/256 1.671 -0.032
30-year bond 88-196/256 2.4058 -0.010
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 10.50 0.25
spread
U.S. 3-year dollar swap 11.25 0.00
spread
U.S. 5-year dollar swap 8.00 -0.25
spread
U.S. 10-year dollar swap -5.00 -2.00
spread
U.S. 30-year dollar swap -33.00 -2.25
spread
(Reporting by Chuck Mikolajczak; Editing by Hugh Lawson and Jan
Harvey)
