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Yields steady after New York manufacturing data

July 17, 2023By Reuters

July 17 (Reuters) – US Treasury yields held steady on Monday after rising slightly on New York manufacturing data in the morning, as market participants await a signal for monetary policy at the US Federal Reserve’s meeting next week.

Benchmark 10-year note yields dipped slightly on the day to 3.810%, from around 3.824% before the data. They are down from an eight-month high of 4.094% reached on July 7.

Interest rate- ensitive two-year note yields held at 4.750%. They are down from 5.12% hit on July 6, their highest since June 2007.

The Empire State Manufacturing Survey’s general business conditions index, released on Monday morning, fell to 1.1 from 6.6 in June. It indicated that activity changed little in July at the same time as delivery times shortened and inventories declined steadily.

Just 29% of surveyed firms sounded off that conditions improved in July compared to June, while 27% said conditions had deteriorated.

At the same time, new orders edged higher while shipments increased and employment levels ticked up slightly from last month.

The survey results come as investors anticipate a small rate hike coming out of the US Federal Reserve’s next meeting on July 25-26.

“I think generally the Fed probably has one more hike to do in July,” said Tom di Galoma, managing director and co-head of global rates trading at BTIG in New York. “So I think that any time the market sees better-than-expected news, all of a sudden people start thinking about what the Fed’s going to do.”

What remains unclear is whether the Fed will hold rates steady after that or move forward with further hikes for the remainder of the year.

“The Treasury market at the moment feels pretty fragile to me because the narrative around what’s going on in the economy’s still very unstable,” said Ed Al-Hussainy, senior global rates strategist at asset manager Columbia Threadneedle in New York.

“If the Fed comes out and signals that they need to do more beyond the July meeting, the market is going to get caught offside a little bit,” he added.

The inversion in the yield curve between two-year and 10-year notes widened to minus 94 basis points from 93 basis points after Monday’s data.

Several major economic data points on Tuesday will further clarify the Fed’s remaining work needed to rein in inflation.

These include US retail sales data for June set to be released at 8:30 am ET (1230 GMT), while the home builder confidence index for July is set for release at 10 am ET (1400 GMT).


July 17 Monday 3:40 PM New York / 1940 GMT

Price Current Yield % Net Change (bps)
Three-month bills 5.2525 5.4079 -0.003
Six-month bills 5.2475 5.4762 -0.004
Two-year note 99-196/256 4.7509 0.000
Three-year note 100-110/256 4.3451 -0.014
Five-year note 99-232/256 4.0207 -0.012
Seven-year note 98-248/256 3.9207 -0.007
10-year note 96-116/256 3.8107 -0.009
30-year bond 94-160/256 3.9324 0.007
Last (bps) Net Change (bps)
US 2-year dollar swap spread 18.25 -0.50
US 3-year dollar swap spread 15.75 0.75
US 5-year dollar swap spread 6.75 -0.25
US 10-year dollar swap spread 1.75 -0.50
US 30-year dollar swap spread -38.75 -0.75

(Reporting by Matt Tracy, Editing by Nick Zieminski and Will Dunham)

This article originally appeared on reuters.com

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