(New throughout)
By Kate Duguid
NEW YORK, March 30 (Reuters) - U.S. Treasury yields dipped
in Tuesday afternoon trade, reversing an overnight rise in the
benchmark yield to a 14-month high, as traders prepared for
quarter-end and ahead of President Joe Biden's infrastructure
spending announcement.
The 10-year yield rose to 1.776% in early London
trade, its highest since Jan. 22. That steepened the yield curve
- measured as the spread between the two- and 10-year yields
- to its widest since July 2015. Both moves had
reversed on Tuesday afternoon with the 10-year yield last down
0.7 basis point on the day to 1.714%.
Traders must rebalance their portfolios at the end of the
month and quarter to account for the drop in maturity of a bond
portfolio as time passes. In order to rebalance, traders buy
longer-dated debt, which typically drives yields lower.
The dip in yields comes ahead of Biden's infrastructure
announcement on Wednesday in Pittsburgh. The plan could have a
price tag as high as $4 trillion to pay for traditional roads
and bridges while also addressing climate change and income
equality. Such a plan would require an increase in debt issuance
that would drive Treasury prices lower and yields higher.
Tuesday's dip in yields may therefore be a temporary move
ahead of the announcement.
"I still think we're in a window between now and tomorrow at
3 o'clock where there is demand for rates," said Andrew Brenner,
head of international fixed income at National Alliance
Securities.
While demand from traders rebalancing their portfolios may
have driven rates slightly lower on Tuesday, the forces which
have been pushing rates higher, including the expected increase
in Treasury supply, are likely to continue pressuring yields.
"I think it's about supply, I think it's about inflation, I
think it's about an economy moving very quickly, I think it's
about stimulus," Brenner said about the move higher earlier
Tuesday and the general trend in Treasury yields.
March 30 Tuesday 3:53PM New York / 1953 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.025 0.0253 0.000
Six-month bills 0.04 0.0406 -0.005
Two-year note 99-246/256 0.1446 0.000
Three-year note 99-198/256 0.3271 0.005
Five-year note 99-70/256 0.8989 0.008
Seven-year note 99-34/256 1.3804 0.010
10-year note 94-172/256 1.7136 -0.007
20-year bond 93-136/256 2.2815 -0.038
30-year bond 89-92/256 2.3742 -0.050
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 13.50 1.00
spread
U.S. 3-year dollar swap 15.75 1.00
spread
U.S. 5-year dollar swap 10.75 0.75
spread
U.S. 10-year dollar swap 2.75 0.50
spread
U.S. 30-year dollar swap -22.00 1.50
spread (Reporting by Kate Duguid; editing by Jonathan Oatis and
Marguerita Choy)
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