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WASHINGTON, March 11 – US Treasury yields rebounded on Monday from last week’s decline, as investors consolidated positions ahead of a slew of economic data including the latest inflation and jobs figures.

The benchmark US 10-year Treasury yield on Monday was little changed to slightly higher at 4.096%, after declining for four straight days. US 30-year yields remained relatively flat at 4.261%.

On the shorter end of the curve, the two-year Treasury yield rose 4.8 basis points to 4.535% after also falling for four days in a row.

A slew of new corporate debt and Treasury bond issuance entered the market on Monday.

“Usually Monday is a very heavy new issue supply day,” said Tom di Galoma, co-head of global rates strategy at investment firm BTIG. “And so I think rates have risen both in Europe and in the US due in part to that.”

Wall Street dealers typically look to lock in borrowing costs for corporate bonds they are underwriting. As part of that process, dealers sell Treasuries as a hedge to lock in the borrowing cost before a bond sale. Once the bond is sold, the dealer buys Treasuries to exit the “rate lock.”

A closely watched part of the US Treasury yield curve measuring the gap between two- and 10-year Treasury yields, seen as an indicator of economic expectations, deepened its inversion to minus 44.2 bps, from minus 40.3 bps at Friday’s close.

An inverted yield curve historically is seen as a precursor of recession.

Investors are also looking ahead to several key economic datapoints this week which will further inform the Federal Reserve’s interest rate policy stance.

The market is pricing in a 97% chance of no rate cuts by the Fed following next week’s March FOMC meeting, CME’s FedWatch data showed. The reverse is the case for June’s meeting, with the market pricing in 70.2% odds of easing.

Perhaps most significant is Tuesday release of February’s consumer price index, which is expected to come in slightly higher than January’s prices on a headline basis but lower based on core prices.

February’s CPI “should alleviate concerns that inflation is reaccelerating after the January data,” BofA Global Research said in a report on Monday.

“Overall, a report in line with our expectations would keep the Fed on track to begin cutting rates at its June meeting,” BofA later added.

February’s producer price index will follow on Wednesday, in addition to initial jobless claims for the week ended March 8. Both readings are expected to align with the previous figures.

No Fed members are scheduled to speak this week, due to a blackout period ahead of next week’s March meeting.

On Monday, the US Treasury held an auction for USD 56 billion in three-year notes. It was well-received, with a high yield of 4.256%, below expectations at the bid deadline. This suggested that investors did not demand a premium to take down the note.

The bid-to-cover ratio, a gauge of demand, was 2.60, slightly above the February level of 2.58, but still a little lower than the 2.70 average.

The Treasury is also set to sell USD 39 billion in 10-year notes on Tuesday, followed by USD 22 billion in 30-year notes on Wednesday.

(Reporting by Matt Tracy; Editing by Ros Russell, Gertrude Chavez-Dreyfuss and Richard Chang)

 

March 7 – Benchmark 10-year US Treasury yields dipped on Thursday but came off of one-month lows reached earlier in the day before highly anticipated US jobs data on Friday that may offer new clues on Federal Reserve policy.

The employment report for February is expected to show that employers added 200,000 jobs during the month.

It comes after unexpectedly strong jobs and inflation reports for January, which were attributed in part to seasonal factors.

Benchmark 10-year yields have fallen from almost three-month highs reached last month as investors price for the likelihood that the US central bank is getting closer to rate cuts.

“As we creep forward towards the first set of Fed rate cuts later this year, I expect yields to move a little bit lower,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.

Fed Chair Jerome Powell said on Thursday in his second day of testimony to Congress that the US central bank was “not far” from gaining the confidence it needs in falling inflation to begin cutting interest rates.

That echoes his comments on Wednesday that interest rate cuts are still likely in coming months
but only if warranted by further evidence of falling inflation.

Yields fell after Powell’s statement on Wednesday as investors unwound hedges that were placed in case he took a more hawkish tone.

“There was a prospect that Powell could come out slightly more hawkish after January’s high inflation print, but he largely ignored it,” LeBas said.

Consumer price inflation for February due on Tuesday will be watched for signs that January’s larger-than-expected uptick in prices was an anomaly.

Data on Thursday showed that the number of Americans filing new claims for unemployment benefits was unchanged last week, though continuing claims rose to the highest level since last November.

Benchmark 10-year yields were last down one basis point on the day at 4.092%, after earlier reaching 4.054%, the lowest since Feb. 5.

Two-year yields fell 5 basis points to 4.514%. The inversion in the yield curve between two-year and 10-year notes narrowed by three basis points to minus 42 basis points.

Fed funds futures traders are pricing in a 72% probability the Fed will begin cutting rates in June, according to the CME Group’s FedWatch Tool.

Treasury yields fell earlier on Thursday after the European Central Bank (ECB) left interest rates unchanged as expected on Thursday but acknowledged that inflation is easing faster than once thought, potentially opening the way for rate cuts later this year.

That sent European bond yields lower, with markets now pricing in over 100 basis points rate cuts by the ECB this year.

Treasury yields were “following the move in Europe,” said Tom di Galoma, managing director and co-head of global rates trading at BTIG in New York. “It was kind of a dovish signal from the ECB.”

The US Treasury Department said on Thursday it will sell USD 117 billion in coupon-bearing supply next week, including USD 56 billion in three-year notes on Monday, USD 39 billion in 10-year notes on Tuesday, and USD 22 billion in 30-year bonds on Wednesday.

The amount banks and fund managers lent to the Fed in its reverse repurchase agreement facility dropped to USD 436.75 billion on Thursday, the lowest since mid-2021.

(Reporting By Karen Brettell, Editing by Franklin Paul and Diane Craft)

WASHINGTON, March 7 – Federal Reserve Chair Jerome Powell said on Thursday the US central bank was “not far” from gaining the confidence it needs in falling inflation to begin cutting interest rates.

“I think we are in the right place,” Powell said of the current stance of monetary policy in a hearing before the Senate Banking Committee. “We are waiting to become more confident that inflation is moving sustainably down to 2%. When we do get that confidence, and we’re not far from it, it will be appropriate to begin to dial back the level of restriction so that we don’t drive the economy into recession.”

The comment showed Powell’s faith that recent higher-than-expected inflation readings and other strong economic data won’t interrupt the ongoing decline in price pressures that took root last year.

The Fed chair has been reluctant to declare the inflation battle finished, and cautioned in testimony to the Senate panel, as he did Wednesday before the House Financial Services Committee, that further progress back to the Fed’s 2% target was
not assured.

The most recent data showed headline inflation, as measured by the Fed’s preferred Personal Consumption Expenditures price index, at 2.4%, with a related measure of underlying inflation at a slightly higher 2.8%.

But both have been “coming down sharply since the middle of last year,” Powell said. “We’ve got a ways to go on that, but we’ve made a lot of progress.”

Yields on 2-year Treasury notes fell slightly after Powell’s remarks, and investors firmed bets that an initial Fed rate cut would occur in June.

The central bank next meets on March 19-20, and will issue a new policy statement as well as updated rate and economic projections that should shed more light on policymakers’ expectations for the year.

Powell’s appearance before the Senate committee and a House panel on Wednesday, as is often the case in the twice-yearly round of hearings, was dominated less by monetary policy and more with an ongoing debate about Fed bank regulatory proposals, as well as a host of other issues, including housing policy and whether the Fed would issue a central bank digital currency.

But Powell’s update on monetary policy kept intact the sense that the central bank is nearing the point where the current policy rate of interest, held at a more than 20-year high since July in a range between 5.25% and 5.5%, will be lowered in the months ahead.

Pressed at the start of the hearing by the panel’s chair, Ohio Democrat Sherrod Brown, on why the Fed was not quicker to cut rates “to prevent workers from losing their jobs,” Powell said that was a top-of-mind concern, while nodding also to the economy’s resilience.

“We’re well aware of that risk, of course, and very conscious of avoiding it,” Powell said. “If what we expect and what we’re seeing – continued strong growth, strong labor market, and continuing progress in bringing inflation down – if that happens, if the economy evolves over that path, then we do think that the process of carefully removing the restrictive stance of policy can and will begin over the course of this year.”

(Reporting by Howard Schneider; Editing by Andrea Ricci)