By Karen Brettell
NEW YORK, Feb 24 (Reuters) - U.S. Treasury yields jumped
on Friday, with two-year yields hitting three-and-a-half-month
highs, after data showed that U.S. consumer spending rebounded
sharply in January amid strong income growth, while inflation
accelerated.
Consumer spending, which accounts for more than two-thirds
of U.S. economic activity, jumped 1.8% last month. Economists
polled by Reuters had forecast consumer spending rebounding
1.3%.
The personal consumption expenditures (PCE) price index also
shot up 0.6% last month, after gaining 0.2% in December.
"This is increasing pressure on the Fed to keep going. They
clearly have some work to do to slow the economy down and bring
inflation back to 2%," said Priya Misra, head of global rates
strategy at TD Securities in New York.
Two-year yields , which are highly sensitive to
Federal Reserve policy, rose as high as 4.772%, the highest
since Nov. 4. Benchmark 10-year yields increased to
3.932%. They are holding just below the 3.978% reached on
Thursday, which was the highest since Nov. 10.
Fed funds futures traders are pricing for the Fed’s
benchmark rate to peak at 5.38% in July, up from 4.58% now. February 24 Friday 8:49AM New York / 1349 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 4.72 4.8408 0.009
Six-month bills 4.915 5.1074 0.016
Two-year note 99-190/256 4.7617 0.069
Three-year note 98-174/256 4.4797 0.073
Five-year note 99-50/256 4.18 0.075
Seven-year note 99-110/256 4.0945 0.067
10-year note 96-120/256 3.9315 0.050
20-year bond 97-48/256 4.0823 0.038
30-year bond 95-4/256 3.9087 0.031
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 32.75 -0.50
spread
U.S. 3-year dollar swap 19.25 0.50
spread
U.S. 5-year dollar swap 6.75 -0.75
spread
U.S. 10-year dollar swap -0.75 -0.25
spread
U.S. 30-year dollar swap -40.25 -0.50
spread
(Additional reporting by Herb Lash in New York; Editing by
Kirsten Donovan)
