(Updates throughout; adds analyst comments, upcoming ADP
report, and reverse repo volume)
By Karen Pierog
CHICAGO, June 29 (Reuters) - U.S. Treasury yields hugged the
unchanged mark on Tuesday as the market waited to see how June
U.S. employment data, due later this week, might affect the
Federal Reserve's monetary policy stance.
The benchmark 10-year yield, which rose as high
as 1.51% earlier in the session, was last flat at 1.4782%.
"We're sitting in a little bit of consolidation range on a
technical level," said Ellis Phifer, managing director in fixed
income research at Raymond James, noting "the calm before the
potential storm" that the closely watched nonfarm payrolls
report due out Friday could bring.
Ahead of the U.S. Labor Department's data, Wednesday's ADP
National Employment Report is expected to show private payrolls
rose by 600,000 in June, after surging by 978,000 in May.
While the ADP report is at times not a good predictor of the
government's data, it will still be watched by the market,
particularly if there are any substantial revisions to its May
numbers, said Andrew Richman, senior fixed income strategist at
Sterling Capital Management.
A clearer picture of the jobs market, a key focus of the
Fed, will emerge in the coming months when enhanced unemployment
benefits end and students head back to classrooms, freeing
parents to return to work, said Bill Merz, chief fixed income
strategist at U.S. Bank Wealth Management.
He cited many unknowns regarding the speed and magnitude of
the Fed's easing of the accommodative policies put in place last
year to aid the coronavirus-battered economy.
"The bottom line is that we're all macro investors now and
the macro picture is cloudy," Merz said, noting concerns about
how much the economy can be tightened even as the flood of
stimulus continues.
Richmond Fed President Thomas Barkin said on Tuesday he
would be ready to start tapering the central bank's $120 billion
in monthly asset purchases as soon as "substantial further
progress" on employment has been met.
Meanwhile, the amount of cash flowing into the Fed's
overnight reverse repurchase operation hit a record high $841.2
billion on Tuesday. While volume has been building since March,
it grew further after the Fed earlier this month raised the rate
it pays on reverse repurchase agreements to 0.05% from 0% as
part of technical adjustments to keep the effective federal
funds rate from falling too low.
The two-year Treasury yield was last less than a
basis point lower at 0.2524%.
A closely watched part of the yield curve that measures the
gap between yields on two- and 10-year Treasury notes
was last less than a basis point steeper at 122.58
basis points.
June 29 Tuesday 3:10PM New York / 1910 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.05 0.0507 -0.002
Six-month bills 0.055 0.0558 -0.002
Two-year note 99-191/256 0.2524 -0.004
Three-year note 99-98/256 0.4602 0.000
Five-year note 99-236/256 0.891 -0.003
Seven-year note 100-12/256 1.243 -0.001
10-year note 101-88/256 1.4782 0.000
20-year bond 103-160/256 2.0274 -0.004
30-year bond 106-56/256 2.0939 -0.004
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 7.75 0.25
spread
U.S. 3-year dollar swap 11.00 0.50
spread
U.S. 5-year dollar swap 7.00 0.25
spread
U.S. 10-year dollar swap -2.75 0.75
spread
U.S. 30-year dollar swap -31.00 1.00
spread (Reporting by Karen Pierog; Editing by Paul Simao and Richard
Chang)
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