Rates & Bonds 3 MIN READ

Yields tick higher as Fed hike, jobs report loom in week ahead

January 30, 2023By Reuters

US Treasury yields edged higher on Monday at the start of a busy week of economic data and a widely anticipated interest rate hike by the Federal Reserve.

Investors have priced in a near-certainty that the Fed would raise benchmark rates by 25 basis points at the end of its meeting on Wednesday, the smallest increase since the central bank began its rate-hike cycle 10 months ago.

Economic data scheduled to be released this week, which includes readings on consumer confidence, construction spending, and unemployment, are expected to factor into whether the Fed will conclude its rate hikes in March.

“We anticipate the price action itself will be the most relevant takeaway from the session [today] as investors seek to setup for this week’s array of fundamental and policy developments,” said Ian Lyngen, head of US Rates Strategy at BMO Capital Markets.

The yield on 10-year Treasury notes was up 3.5 basis points to 3.553%, bringing it close to its highest level since Jan. 11.

The yield on the 30-year Treasury bond was up 2.8 basis points to 3.662%.

Rising concerns about the possibility of a default if Congress does not raise the debt ceiling helped propel greater demand for 6-month bills than for 3-month bills in separate auctions held Monday, said Thomas Simons, money market economist at Jefferies LLC.

“It is possible that the buyside is steering clear of the 3-month because of an expected paydown in bills that will be ongoing when this bill matures,” he said.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at -70.6 basis points.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 5 basis points at 4.257%.

January 30 Monday 1:21PM New York / 1821 GMT

  Price Current Yield % Net Change (bps)
Three-month bills 4.5525 4.6665 -0.010
Six-month bills 4.63 4.8037 -0.035
Two-year note 99-193/256 4.2547 0.048
Three-year note 99-194/256 3.9621 0.054
Five-year note 99-48/256 3.6794 0.058
Seven-year note 99-60/256 3.6248 0.046
10-year note 104-176/256 3.5532 0.035
20-year bond 102-224/256 3.7918 0.027
30-year bond 106-24/256 3.662 0.028
Last (bps) Net Change (bps)  
U.S. 2-year dollar swap spread 27.75 -0.25  
U.S. 3-year dollar swap spread 14.75 0.50  
U.S. 5-year dollar swap spread 5.75 -0.25  
U.S. 10-year dollar swap spread -2.00 0.25  
U.S. 30-year dollar swap spread -37.50 0.00  


(Reporting by David Randall; Editing by Arun Koyyur and Andrea Ricci)

This article originally appeared on reuters.com

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