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Yields edge higher as investors expect Fed to act on inflation

Kitco News

NEW YORK, Nov 23 (Reuters) - U.S. Treasury yields edged higher in choppy trading Tuesday as investors prepared for the Federal Reserve to become more aggressive in fighting inflation after President Joe Biden nominated Jerome Powell for a second term helming the Federal Reserve. read more

The yield on 10-year Treasury notes was up 1.8 basis points to 1.643%. The yield on the 30-year Treasury bond was up 1.3 basis points to 1.991%.

The move higher in yields was not uniform, however, with the two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, down 1.4 basis points at 0.616% after hitting its highest level since March 2020 on Monday.

"The pressure on the Fed to react to the recent acceleration in inflation is building not just from the so-called inflation vigilantes and the hawks on the Committee, but also from the progressive academics and from their peers at other central banks," said Steven Ricchiuto, U.S. Chief Economist at Mizuho Securities.

The Treasury Department will auction $59 billion in 7-yaer notes later this afternoon, which could spur investor interest after recent declines, said Ben Jeffery, a strategist at BMO Capital Markets.

"The cheapening over the past several weeks that has extended this morning adds some outright appeal to 7s, and given their relative performance on the curve there is also a case to be made we could see some dip buying," he said.

The yield curve, meanwhile, slightly steepened, with spreads between 5- and 30-year Treasuries rising Tuesday after touching their to their lowest levels since March 2020 the day before.

November 23 Tuesday 9:33AM New York / 1433 GMT

Price
Current Yield %
Net Change (bps)
Three-month bills
0.05
0.0507
-0.002
Six-month bills
0.075
0.0761
0.000
Two-year note
99-195/256
0.6201
-0.010
Three-year note
99-112/256
0.9422
0.003
Five-year note
99-144/256
1.3408
0.017
Seven-year note
98-176/256
1.5755
0.026
10-year note
97-128/256
1.6478
0.023
20-year bond
99-76/256
2.0431
0.018
30-year bond
97-84/256
1.9938
0.016
DOLLAR SWAP SPREADS
Last (bps)
Net Change (bps)
U.S. 2-year dollar swap spread
23.75
-2.75
U.S. 3-year dollar swap spread
23.25
1.75
U.S. 5-year dollar swap spread
10.25
-0.50
U.S. 10-year dollar swap spread
6.00
0.50
U.S. 30-year dollar swap spread
-16.75
0.75
Reporting by David Randall, Editing by Nick Zieminski
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