(Adds quotes, details on Fed, Biden calendar, economic outlook)
By Karen Brettell
NEW YORK, April 28 (Reuters) - U.S. Treasury yields gave
back earlier gains on Wednesday before the Federal Reserve is
due to conclude its two-day meeting, with investors focused on
whether the U.S. central bank will give any hints towards
removing its unprecedented accommodation as the American economy
improves.
Business reopenings from COVID-19-related shutdowns have
accelerated this month, and investors are also pricing for
higher inflation as fiscal spending increases.
"With the reopening process, it seems to have hit a higher
gear in April," said Tom Simons, a money market economist at
Jefferies in New York.
Investors will be watching to see whether the Fed indicates
that it may taper its bond purchases as the economy bounces
back, though the Fed is viewed as unlikely to give any firm
signals that tightening is near.
"There has to be an acknowledgement that its somewhere out
there on the timeline, but I think that's about as far as we're
going to go," Simons said. "It's more likely at the next meeting
we get something more concrete on that front.
"It's going to be more or less a tightrope walk trying to
acknowledge what's gone on in the economy over the inter-meeting
period, which has pretty much all been positive, while also not
really saying that the Fed is any closer to pulling back on
accommodation," he added.
Benchmark 10-year Treasury yields have pulled back from
one-year highs of 1.776% reached last month, and have been
trading at the bottom end of their recent range before rising
this week.
The 10-year yields were last little changed on
the day at 1.627%, after earlier rising to 1.652%.
Inflation expectations, meanwhile, hit eight-year highs,
with breakeven rates on 10-year Treasury Inflation-Protected
Securities pricing in average annual inflation of
2.43% for the next decade.
Gross domestic product data on Thursday is expected to show
strong growth in the first quarter, while next week's employment
data for April should also show an improving labor market.
U.S. President Joe Biden will address Congress on Wednesday
with his plans to spend $1.5 trillion on childcare and college
education and raise taxes on wealthy Americans to pay for it.
That is on top of a $2 trillion jobs-and-infrastructure plan
paid for by raising taxes on U.S. companies.
Market participants will also watch to see whether the U.S.
central bank raises the interest it pays on excess reserves
(IOER) and overnight reverse repurchase agreements as borrowing
rates in repo intermittently trade negative and short-term bill
yields approach zero.
April 28 Wednesday 9:31AM New York / 1331 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.02 0.0203 0.005
Six-month bills 0.0375 0.038 0.003
Two-year note 99-230/256 0.1759 -0.004
Three-year note 100-16/256 0.3538 -0.002
Five-year note 99-98/256 0.8764 -0.002
Seven-year note 99-132/256 1.3227 0.002
10-year note 95-120/256 1.6271 0.005
20-year bond 95-28/256 2.1804 0.000
30-year bond 90-252/256 2.2943 0.001
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 11.25 0.50
spread
U.S. 3-year dollar swap 13.50 0.25
spread
U.S. 5-year dollar swap 8.00 0.75
spread
U.S. 10-year dollar swap -1.00 0.00
spread
U.S. 30-year dollar swap -27.50 0.00
spread (Reporting by Karen Brettell; additional reporting by Yoruk
Bahceli in London; editing by Jonathan Oatis)
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