Gold loses footing as US dollar rises; Fed in focus

March 19 – Gold prices retreated on Tuesday as the dollar strengthened a day before the Federal Reserve signals its interest rate stance at the end of the US central bank’s two-day policy meeting.

Spot gold fell 0.2% to USD 2,155.93 per ounce as of 2:18 p.m. EDT (1817 GMT), hovering close to the one-week low reached on Monday.

US gold futures settled 0.2% lower at USD 2,159.7.

The dollar gained 0.2%, having touched a more than two-week high earlier in the session, making gold more expensive for overseas buyers.

Gold is seeing “some exhaustion to the upside as the positions moved swiftly over the past week or two and now it’s taking a bit of a breather as the Fed pricing comes off a bit,” said Ryan McKay, commodity strategist at TD Securities.

“For now we’re not expecting a rally anytime soon. But at the same time, we’re not expecting a big sell-off either because the physical markets remain strong and positioning is still fairly bullish.”

Gold prices hit a record peak of USD 2,194.99 per ounce on March 8, but prices dipped nearly 1% last week after the release of hotter-than-expected February US consumer prices and producer prices reduced hopes of early Fed rate cuts due to the threat of persistent inflation.

Higher inflation prompts the Fed to keep interest rates elevated, weighing on non-yielding gold.

Although the Fed is widely expected to hold rates steady on Wednesday, the market is awaiting comments from Fed Chairman Jerome Powell afterwards for its latest rate outlook.

Meanwhile, the Bank of Japan (BOJ) ended eight years of negative interest rates and other remnants of its unorthodox policy.

Spot silver fell 0.5% to USD 24.91 per ounce, platinum lost 1.8% to USD 894.19, palladium slipped 3.8% to USD 992.50.

(Reporting by Anjana Anil in Bengaluru; Editing by Emelia Sithole-Matarise, Richard Chang, and Ravi Prakash Kumar)

Yen down with JGB yields, stocks rally after landmark BOJ stimulus exit

TOKYO, March 19 – The yen weakened, and Japanese government bond yields fell after the Bank of Japan on Tuesday announced an exit from years of ultra-easy monetary policies, marking an historic shift from a decades-long fight against deflation.

The Nikkei share average rose, reversing morning losses, following volatile trading immediately after the central bank said it was ending its negative interest rates policy and yield curve control (YCC), as well as dropping purchases of risky assets, including exchange-traded funds (ETFs).

The decision was widely expected after local and international media, including Reuters, had reported over the past week of a likely end to most or all of the BOJ’s stimulus program at this policy meeting.

That resulted in ‘sell-the-fact’ trade in Japanese markets, analysts said.

The yen, in particular, appeared to have fallen victim to that, with domestic rates still also extremely low compared with the United States. The dollar jumped 0.84% to 150.385 yen as of 0604 GMT.

The Nikkei finished the day up 0.66% at 40,003.60, recovering the psychological 40,000 mark for the first time since hitting an all-time high at 40,472.11 on March 7.

The 10-year JGB yield lost 3 basis points to 0.725%.

Some dovish undertones in the BOJ’s policy decision will keep bond yields under pressure, said Shoki Omori, chief Japan desk strategist at Mizuho Securities.

“Bond purchase amounts basically stay the same, which means the BOJ isn’t taking a hawkish stance,” cheering investors such as life insurers who need to buy bonds into Japan’s fiscal year-end this month, he said.

Omori also expects the yen to continue to fall.

“The yen remains a funding currency and is likely to keep being utilized for carry trades,” he said.

Tuesday’s policy shift ushered in the first-rate hike in Japan since 2007, but it still keeps rates stuck around zero.

BOJ Governor Haruhiko Ueda will explain the policy decision in a press conference scheduled for 0630 GMT.

In its policy statement, the bank said it will continue its JGB purchases at broadly the same amount as before, although it will scale back the maximum limit of its purchases.

The BOJ’s move to end its radical stimulus policies was in part helped by the biggest wage hikes in 33 years at annual negotiations with unions. Finance Minister Shunichi Suzuki said on Friday that Japan had emerged from decades of deflation.

A positive spiral of price hikes and wage increases as well as solid earnings drove a 19% surge in the Nikkei this year, far outpacing a 6.6% rise for the MSCI World Index.

“For the time being, I expect equity prices to increase, with the uncertainty gone surrounding the meeting,” said Norihiro Yamaguchi, senior economist at Oxford Economics in Tokyo.

(Reporting by Kevin Buckland; Editing by Jacqueline Wong and Shri Navaratnam)

Oil rises to multi-month highs on Russian supply concerns

NEW YORK, March 19 – Oil prices rose to multi-month highs for the second straight session on Tuesday as traders assessed how Ukraine’s recent attacks on Russian refineries would affect global petroleum supplies.

US West Texas Intermediate crude futures gained 75 cents, or 0.9%, to settle at USD 83.47 a barrel, the highest since Oct. 27. Global benchmark Brent crude settled 0.6% higher at USD 87.38 a barrel, the highest since Oct. 31.

Ukraine has stepped up attacks on Russian oil infrastructure this year, with at least seven refineries targeted by drones just this month. The attacks have shut down 7%, or around 370,500 barrels per day, of Russian refining capacity, Reuters calculations show.

While lower refining activity has led to an increase in Russian crude oil exports, it could also lead to crude oil production cuts as the country faces storage constraints, StoneX energy analyst Alex Hodes said.

Based on Hodes’ calculations, the attacks on Russian refineries could result in a decrease of around 350,000 bpd of global petroleum supplies and boost US crude prices by USD 3 per barrel.

Even if the attacks do not lead to a direct loss of Russian crude supply, there is still a spillover effect for oil prices from surging refined product margins, SEB Research analyst Bjarne Schieldrop wrote on Monday.

Oil gained support from declining crude exports from Saudi Arabia and Iraq, as well as signs of stronger demand and economic growth in China and the US.

US single-family homebuilding rebounded sharply in February, the Commerce Department reported. Homebuilding could boost economic growth, supporting oil demand.

“Oil demand data surprising on the positive side and the extension of the voluntary OPEC+ cuts until the end of June have supported prices,” UBS analyst Giovanni Staunovo said.

“Brent will likely trade in an USD 80-90 per barrel range this year, with an end-June forecast of USD 86 per barrel,” Staunovo added.

US crude oil stocks fell by 1.5 million barrels in the week ended March 15, market sources said citing American Petroleum Institute figures. A Reuters poll of analysts expected stocks to rise by about 10,000 barrels last week.

Official stockpile data from the US Energy Information Administration is due at 10:30 a.m. ET
(1430 GMT) on Wednesday.

(Reporting by Shariq Khan in New York, Noah Browning in London and Trixie Yap in Singapore; Additional reporting by Paul Carsten in London; Editing by Mark Potter, David Goodman, Will Dunham, and David Gregorio)

China property’s Enron damp squib may yet surprise

MELBOURNE/HONG KONG, March 19 – When is a USD 78 billion fraud nothing to worry about? Hong Kong’s benchmark Hang Seng Index lost 1% on Tuesday, as markets shrugged off a Chinese regulator’s findings that by booking sales early China Evergrande inflated revenue at its flagship unit by 564 billion yuan (USD 78 billion) over 2019 and 2020 – a whopping 65% of its top line over the period. But as the 2001 demise of Enron shows, the pain can be shared widely.

Evergrande is no stranger to being compared to the defunct U.S. power company, which used all manner of special-purpose vehicles and other tools to hide losses and seemingly boost income. Short seller Citron Research mentioned it in its 2012 report that called the now-bankrupt Chinese group “insolvent” and “fraudulent”; Andrew Left, the hedge fund’s founder, was banned from trading in the Hong Kong market for five years as a result.

One big difference, of course, is that Enron’s descent from market darling to bankruptcy only took a few months. Evergrande and peers like Country Garden have been under pressure since Beijing issued its three red lines in August 2020 to try to rein in the bubbly real-estate market. Moreover, in January a Hong Kong court ordered Evergrande to liquidate; founder Hui Ka Yan was detained last year on suspicion of unspecified crimes. So it’s understandable that investors might be blasé about the latest news.

There could be plenty more unpleasant surprises, though. First, the securities regulator has so far only targeted two years of Evergrande’s accounts. If the watchdog chooses to look further back, the alleged fraud could well be exponentially larger than Enron’s – a politically embarrassing scandal for Beijing at a time when foreign investors are already wary of China.

Auditors will probably be on the hook for some blame, too – in this case PricewaterhouseCoopers’s China affiliate. It quit last year as Evergrande’s accountant, and liquidators were already planning to sue the unit, the Financial Times reported last month. Enron’s collapse famously precipitated, along with the scandal at telecom company WorldCom, the demise of then-Big Five accounting firm Arthur Andersen. The Evergrande fiasco could accelerate the retreat of the Big Four in China. PwC’s mainland, Hong Kong and Macau operations boast over 800 partners.

Banks also may be in the firing line, as JPMorgan and Citi were for work done for Enron. China’s securities regulator has flagged that Evergrande bonds issued off the back of 2019 or 2020 earnings could be fraudulent, which bodes ill for the underwriters.

The latest findings may not change much at Evergrande. But investors are being too sanguine if they think the buck stops there.

CONTEXT NEWS

The China Securities Regulatory Commission on March 18 accused China Evergrande of committing financial fraud by inflating the sales of its flagship unit by a total of 564 billion yuan (USD 78 billion) over a two-year period.

The company did so, alleges the watchdog, by booking sales on its income statement before they were finalised. In 2019 the tactic boosted the top line by 214 billion yuan, representing around half its revenue that year. In 2020 it added a further 350 billion yuan using the same method, or almost 79% of that year’s total.

Because Evergrande relied on these financial statements to raise debt, the CSRC also accused the company of fraudulently issuing corporate bonds.

The regulator also barred founder Hui Ka Yan from the securities industry for life and fined him 47 million yuan.

(Editing by Robyn Mak and Katrina Hamlin)

Dollar up, yen steady as BOJ policy shift looms

NEW YORK/LONDON, March 18 – The dollar edged higher on Monday ahead of a slew of central bank meetings this week, with the Bank of Japan potentially set to end negative interest rates and the market waiting for the Federal Reserve’s latest projections for its rate cut plans.

In addition to Japan and the United States, central banks in Britain, Australia, Norway, Switzerland, Mexico, Taiwan, Brazil, and Indonesia are all due to meet this week.

The dollar index, which measures the US currency against six other major currencies, rose 0.145% at 103.600. It has strengthened just over 2% this year as the US economy has fared better than expected, leading investors to rein in bets that the Fed will cut rates quickly and deeply this year.

Markets are now pricing in less than three cuts of 25 basis points each in 2024, down from almost double that at the year’s start, LSEG data shows. Futures show about a 51% chance of the first rate cut coming by June, also down sharply from earlier expectations, according to CME Group’s FedWatch Tool.

The yield on benchmark 10-year Treasury notes rose to a three-week high of 4.348%. The advance adds to dollar strength as the market sees rates staying higher for longer.

The focus on Wednesday will be on whether Fed policymakers change their projections, or dot plots, for the economy and rate cuts for this year and the next two. The Fed in December projected 75 basis points of easing in 2024.

“I think they’re going to stay with three cuts, but if they change, it’s more likely to be to two cuts, rather than four,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “One thing that could surprise people would be that the median dot goes up for unemployment.”

The Japanese yen traded little changed, up 0.05% at 149.16 per dollar.

The yen has had a whirlwind few weeks, weakening to 150.88 to the dollar last month. It then rebounded to a one-month high of 146.48 at the start of March, on the back of stronger-than-expected economic data and rising bets that the BOJ is preparing to end eight years of negative interest rates.

Bigger-than-expected pay hikes by major Japanese firms have cemented expectations that the BOJ will exit ultra-loose monetary policy, potentially as soon as at its meeting on Tuesday.

“Recently there have been some signs and some statements from a few of the members of the Bank of Japan signaling that they feel this is a time to not maintain an accommodative financial environment,” said Juan Perez, director of trading at Monex USA in Washington. “But this week it’s really doubtful that they’re going to make a move. They would shock markets.”

April was more likely for the BOJ to exit its ultra-easy monetary policy as a jump in inflation could occur when Japanese subsidies for household energy end that month, Chandler said.

The euro last bought USD 1.0871, down 0.15% while the sterling was at USD 1.27245, down 0.12% ahead of the Bank of England meeting on Thursday when the central bank is expected to hold rates at 5.25%.

Australia’s central bank is due to meet on Tuesday and is widely expected to hold rates steady. The Australian dollar fell 0.05% against the US dollar to USD 0.656.

The US dollar rose 0.52% against the Swiss franc. Some investors think the Swiss National Bank could cut interest rates on Thursday, with inflation having long been within its 0-2% target range.

(Reporting by Herbert Lash, additional reporting by Harry Robertson in London and Ankur Banerjee in Singapore; Editing by Tomasz Janowski, Josie Kao, and Sharon Singleton)

US yields hit three-week highs ahead of Fed meeting

March 18 – Benchmark 10-year US Treasury yields hit three-week highs on Monday as traders looked ahead to the Federal Reserve’s meeting this week for further clues on its rate path this year.

Benchmark 10-year notes’ yields reached 4.348%, up almost 5 basis points on the day and the highest since Feb. 23. The yields are approaching their February high of 4.354%.

Two-year yields touched 4.751%, their highest since Feb. 23. They reached 4.759% last month.

The inversion in the yield curve between two-year and 10-year notes narrowed by 2 basis points to minus 40 basis points.

Market focus is on the Fed’s two-day meeting on Tuesday and Wednesday. It is expected to hold rates steady, with the market’s attention on policymakers’ updated economic and interest rate projections.

“I think that the most important data point is going to be the Fed meeting, and what they show in the summary of economic projections to guide the market through their thoughts on Q1 data,” said Subadra Rajappa, head of US rates strategy at Societe Generale.

Yields rose each day last week following strong economic data reports. These include March 12’s report showing the consumer price index (CPI) rising 0.4% last month, driven largely by higher costs for gasoline and shelter. Thursday’s producer price index (PPI) also exceeded forecasts, rising 0.6% in February versus 0.3% expected.

Traders in Fed funds futures have since reduced bets that the Fed will cut rates by June to 54%, from 59% on Friday, according to the CME Group’s FedWatch tool.

“It seems like a lot of the street is moving towards fewer Fed cuts this year,” said Natalie Trevithick, head of investment grade credit strategy at asset manager Payden & Rygel. “It was questionable why we fell so dramatically in the fourth quarter when everything was so strong. So I think we just went too far too fast, and we’re retracing some of that here.”

The economic data calendar is light this week in lieu of the Fed’s two-day meeting. February housing starts and building permits figures will come on Tuesday, while last week’s initial jobless claims and US services and manufacturing purchasing managers’ index data will come on Thursday.

Last week’s strong data was reinforced on Monday by the National Association of Home Builders’ housing market index, which showed builder confidence rose in March for the fourth month in a row on strong buyer demand, reaching its highest level since July.

The US Treasury Department on Monday auctioned USD 76 billion in 13-week bills and USD 70 billion in 26-week bills. The 13-week auction met with a bid-to-cover ratio of 2.81 times, while the 26-week auction met with a bid-to-cover ratio of 2.76 times.

The Treasury will hold auctions on Tuesday for USD 75 billion in 42-day bills, USD 46 billion in 52-week bills, and USD 13 billion in 20-year bonds.

(Reporting by Matt Tracy; Editing by Richard Chang)

Gold regains ground as investors strap in for Fed policy meet

March 18 – Gold prices firmed after dipping to one-week lows on Monday as investors awaited a series of central bank meetings this week, including the US Federal Reserve’s policy decision on Wednesday, to pick up on clues on inflation and interest rates.

Spot gold was up 0.2% at USD 2,159.69 per ounce at 2:20 p.m. EDT (1820 GMT) after hitting its lowest level since March 7 earlier in the session. Bullion had hit a record high of USD 2,194.99 on March 8.

US gold futures settled 0.1% higher at USD 2,164.3.

“Gold is in anticipation of the interest rate decision on Wednesday, but also maybe the Bank of Japan’s interest rate decision tonight – it can show that globally inflation is rising and obviously gold is a global inflation hedge,” said Daniel Pavilonis, senior market strategist at RJO Futures.

Bullion fell about 1% last week after data showed that US consumer prices increased solidly in February and producer prices rose more than expected, indicating some stickiness in inflation.

Although gold is traditionally considered an inflation hedge, higher interest rates to rein in the elevated prices discourage investment in bullion since it pays no interest.

The Bank of Japan is expected to exit its ultra-dovish monetary policy at its two-day meeting ending on Tuesday.

The Bank of England will hold its meeting on Thursday and is expected to stay put on rates.

Markets also widely anticipate no change in interest rates at the end of Fed’s two-day policy meeting on Wednesday, but are pricing in a 53% chance of a rate cut in June.

“The changes in the dot plot, the expectations of the Fed funds, I think is going to play a role in whether or not gold will resume and continue its uptrend,” Pavilonis added.

Spot silver fell 0.4% to USD 25.06, platinum lost 1.8% to USD 916.19 per ounce and palladium dipped 4.2% to USD 1,031.73.

(Reporting by Anjana Anil in Bengaluru; Editing by Mark Potter, Josie Kao, and Ravi Prakash Kumar)

Oil prices climb 2% to 4-month high on lower Iraq, Saudi exports

NEW YORK, March 18 – Oil prices climbed about 2% to a four-month high on Monday on lower crude exports from Iraq and Saudi Arabia and signs of stronger demand and economic growth in China and the US

Brent futures rose USD 1.55, or 1.8%, to settle at USD 86.89 a barrel, while US West Texas Intermediate (WTI) crude rose USD 1.68, or 2.1%, to settle at USD 82.72.

That pushed both benchmarks into technically overbought territory with Brent closing at its highest since Oct. 31 and WTI closing at its highest since Oct. 27.

In other energy markets, US gasoline futures RBc1 closed at their highest since Aug. 31.

On the supply side, Iraq, OPEC’s second-largest producer, said it would reduce crude exports to 3.3 million barrels per day (bpd) in coming months to compensate for exceeding its OPEC+ quota since January, a pledge that would cut shipments by 130,000 bpd from last month.

In January and February, Iraq pumped significantly more oil than an output target established in January when several members of the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, a group known as OPEC+, agreed to support the market.

In Saudi Arabia, OPEC’s largest producer, crude exports fell for a second straight month, down to 6.297 million bpd in January from 6.308 million bpd in December.

In Russia, meanwhile, Ukrainian attacks on energy infrastructure have idled around 7% of refining capacity in the first quarter, according to a Reuters analysis.

Market participants said refinery outages will push Russia to increase oil exports through its western ports in March by almost 200,000 bpd to around 2.15 million bpd.

In the US, meanwhile, oil output from top shale-producing regions will rise in April to the highest level in four months, according to a federal energy outlook.

SIGNS OF GROWING DEMAND

In China, the world’s biggest oil importer, factory output and retail sales beat expectations in the January-February period, marking a solid start for 2024 and offering some relief to policymakers even as weakness in the property sector remains a drag on the economy and confidence.

“Crude oil is up … today. With demand for crude from China continuing to be a dominant factor,” analysts at energy consulting firm Gelber and Associates said in a note.

China’s crude oil throughput in January and February rose 3% compared to the same two months a year earlier as refineries raised production to meet strong demand for transport fuels over the busy Lunar New Year travel period.

In the world’s biggest economy, the US Federal Reserve (Fed) is widely expected to keep interest rates unchanged when it ends its latest two-day policy meeting on Wednesday.

Stronger-than-expected US economic growth and stickier inflation this year have led investors to push back expectations on the Fed’s first rate cut to June, from May, and reduce bets on how many cuts are likely this year.

Lower interest rates would reduce the cost of buying goods and services, which could boost economic growth and increase oil demand.

In a move expected to boost oil demand, US Energy Secretary Jennifer Granholm said crude oil stockpiles in the Strategic Petroleum Reserve (SPR) at year-end will be at or exceeding the level that would have existed prior to massive sales two years ago.

In other US news expected to boost oil demand, BP’s 435,000 bpd Whiting, Indiana, refinery has returned to normal operations for the first time since a February power outage.

(Reporting by Scott DiSavino, Natalie Grover, Mohi Narayan, and Colleen Howe; Editing by Muralikumar Anantharaman, David Evans, Mark Potter, Louise Heavens, and Paul Simao)

Nerves stretched, China data dump kicks off key week

March 18 – A batch of top-tier Chinese economic data releases gets Asian markets underway on Monday, with sentiment pretty fragile after last week’s global market wobble and as investors brace for US and Japanese policy decisions later in the week.

Asian equity markets are on the defensive. The MSCI Asia ex-Japan index’s 1.4% slump on Friday – its steepest since January – sealed its biggest weekly loss in two months, while Japan’s Nikkei 225 lost 2.5% for its biggest weekly loss this year.

The sharp rebound in US bond yields is taking its toll on risk appetite, and was probably the main catalyst for the selloff in global stocks last week.

The ICE BofA US Treasuries index fell every day last week, its worst run since August resulting in the biggest weekly fall since October. The two-year yield rose 24 basis points, almost the equivalent of a quarter-point rate hike.

The Asia and Pacific calendar this week is packed with hugely important economic data releases and central bank policy meetings, none more so than the Bank of Japan’s two-day meeting that starts on Monday.

Expectations are high that the BOJ will raise interest rates for the first time since 2007, bringing the curtain down on eight years of ‘negative interest rate policy’, or NIRP.

Japan’s biggest companies agreed to raise wages by 5.28% for 2024, the heftiest pay hikes in 33 years, the country’s largest union group said on Friday, reinforcing views that policymakers will make their historic move on Tuesday.

Sources have also told Reuters that the BOJ will offer guidance on how much government bonds it will buy upon ending NIRP and yield curve control (YCC), to avoid causing market disruptions.

Policy decisions from the central banks of China, Australia, Indonesia, and Taiwan are also on tap this week, as are inflation figures from Japan and New Zealand’s fourth-quarter GDP report.

The week kicks off on Monday, though, with four key indicators from China – business investment, retail sales, industrial production, and unemployment.

Some green shoots of recovery in China are gradually becoming visible. There are signs that capital is no longer flooding out the country, stocks have recovered, and some economic data is improving – China’s economic surprises index is the highest since October.

But the road to recovery will be long and rocky. Figures last week showed that house prices fell at their fastest annual rate in over a year, and new bank lending growth fell to the lowest on record.

Figures on Monday are expected to show that business investment growth in February ticked up to 3.2%, industrial output growth slowed to 5.0% and retail sales also slowed to 5.2% from the month before. These are all year-on-year measures.

Here are key developments that could provide more direction to markets on Monday:

– China ‘data dump’ (February)

– Japan machinery orders (January)

– Malaysia trade (February)

(By Jamie McGeever; Editing by Aurora Ellis)

US yields rise further ahead of next week’s Fed meeting

WASHINGTON, March 15 – The benchmark US Treasury yield rose to its highest level in three weeks on Friday, as a mixed batch of data signaled a still-resilient economy, boosting expectations for fewer interest rate cuts by the Federal Reserve this year.

Benchmark 10-year notes’ yields were last up 1.4 basis points (bps) at 4.310%, their highest since Feb. 22. They are on track to post their largest weekly gain since mid-October at 21.8 bps.

US two-year yields were 3.9 bps higher at 4.730%, their highest since Feb. 26. Their weekly performance was the best since mid-January at 23.7 bps.

The two- and 10-year yields’ rise marks the fifth consecutive day of rising yields.

The US five-year note’s yield itself posted the biggest weekly gain since mid-May last year at 26.4 bps. It was last at 4.329%.

Friday’s US economic data showed US industrial production remained relatively flat in February, advancing only 0.1% from January, while manufacturing orders rose 0.8% in February after being revised down sharply in January. The cost of imported goods rose in February for the second month in a row.

Yields extended gains on this week’s news of higher-than-expected inflation. These include February’s consumer price index (CPI) on Tuesday, which rose 0.4%, largely driven by higher gasoline and shelter costs. Thursday’s producer price index (PPI) also exceeded forecasts, rising 0.6% in February versus 0.3% expected.

Traders in Fed funds futures reduced bets that the Fed will cut rates by June to 57.9%, from 62.5% on Thursday, according to the CME Group’s FedWatch tool. While the timing is in question, traders still see at least two rate cuts by the end of 2024.

The Fed is expected to hold rates steady when it meets next week, with the market focused on policymakers’ updated economic and interest rate projections.

“Everything is gradually coming in the direction that the Fed wants it to,” said Michael Lorizio, senior fixed income trader at Manulife Investment Management.

“Even though we did get some new information. I don’t think it’s really changed the landscape all that much, which has to do with the cumulative effect of data releases.”

The inversion in the yield curve between two-year and 10-year notes US2US10=TWEB widened slightly to minus 42.2 basis points from minus 40.7 basis points on Tuesday.

New consumer sentiment data from the University of Michigan showed sentiment for the US economy declined in February from January. This put a slight damper on Treasury yields’ rise, said Ian Lyngen, head of US rates strategy at BMO Capital Markets.

The survey showed inflation expectations over one year remained unchanged at 3%. But this increased to 2.7% from 2.4% over a three-year span, and to 2.9% from 2.5% over five years.

“Treasuries were weaker in the set-up to the University of Michigan print and since the data, we’ve seen yields partially retrace off the day’s peaks,” Lyngen wrote in a Friday note.

The yield on existing 30-year bonds remained relatively flat on the day on Friday at 4.433%. But they have posted their largest gain on the week since early February at 16.8 bps.

(Reporting by Matt Tracy in Washington; Editing by Richard Chang and Matthew Lewis)

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