“The bigger picture story will be towards downward pressure on rates as we progress through 2023 because we will in all probability get closer to rate cuts,” said Padhraic Garvey, regional head of research, Americas at ING. “But in the very short term it wouldn’t surprise me if this marketplace began to focus a little bit away from the banking story and more on the fundamentals, which are still reasonably strong. They will weaken, but they’re reasonably strong and we still have an inflation battle to fight and technically we’re still in a rate hiking environment,” Garvey said. Fed funds futures traders are now pricing in a roughly equal chance that the Fed will hike rates by 25 basis points in May, or leave them unchanged at 4.75-5.00%. They are also pricing for the rate to fall to 4.24% by December. Benchmark 10-year yields rose two basis points to 3.553% on Tuesday. They are up from a six-month low of 3.285% on Friday, but remain below a 15-year high of 4.338% on Oct. 21. Two-year yields rose five basis points to 4.010%, up from a six-month low of 3.555% on Friday but below the almost 16-year high of 5.084% hit on March 8. The closely watched yield curve between two-year and 10-year notes was last at minus 47 basis points. The Treasury Department will sell $43 billion in five-year notes on Tuesday, the second sale of $120 billion in short- and intermediate-dated supply this week. Demand for a $42 billion auction of two-year notes on Monday was weak. The Treasury will also sell $35 billion in seven-year notes on Wednesday.
March 28 Tuesday 9:16AM New York / 1316 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 4.65 4.7713 0.019
Six-month bills 4.655 4.8466 -0.032
Two-year note 99-190/256 4.0104 0.045
Three-year note 102-56/256 3.825 0.033
Five-year note 101-160/256 3.6359 0.041
Seven-year note 102-104/256 3.6037 0.032
10-year note 99-144/256 3.5525 0.024
20-year bond 99-160/256 3.902 0.005
30-year bond 97-112/256 3.7685 0.009
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 33.25 4.25
spread
U.S. 3-year dollar swap 16.75 0.50
spread
U.S. 5-year dollar swap 6.50 0.00
spread
U.S. 10-year dollar swap -1.00 0.00
spread
U.S. 30-year dollar swap -47.25 0.00
spread
(Reporting by Karen Brettell; Editing by Andrea Ricci)
