TREASURIES-Long-dated yields edge lower before inflation data

(Adds comments from Fed officials, updates prices) By Karen Brettell NEW YORK, March 30 (Reuters) - Longer-dated U.S. Treasury yields fell on Thursday as investors waited on key inflation data due on Friday and continued to evaluate whether recent stress in the banking sector has been contained. Treasury yields have stabilized following sharp drops after the collapse of Silicon Valley Bank and Signature Bank this month. However, "nobody wants to make too big of a move in either direction because we don't know if another shoe's going to drop, or if there's going to be an economic change ... are institutions going to pull back from lending? Things like that may push us towards a recession," said Ellis Phifer, managing director of fixed income research at Raymond James in Memphis, Tennessee. Personal consumption expenditures (PCE) data on Friday is the next major U.S. economic focus. That is expected to show core prices rose by 0.4% in February and posted an annual increase of 4.7%. Data on Thursday showed the number of Americans filing new claims for unemployment benefits rose moderately last week, showing no signs yet that tightening credit conditions were having a material impact on the labor market, which remains tight. Federal Reserve officials on Thursday noted that inflation remains a problem. Minneapolis Fed President Neel Kashkari said the U.S. central bank has "more work to do" to get inflation back down to its 2% goal, although he did not say specifically how much further he believes interest rates will need to rise to do the job. Boston Fed President Susan Collins said it seems likely that the U.S. central bank will raise interest rates one more time this year and added that financial sector stress has likely removed some pressure to go further than that. Richmond Fed President Thomas Barkin said that he had not come to a view yet on what rate increase might be appropriate at the Fed's May 1-2 session. Benchmark 10-year yields fell two basis points to 3.547%. They are up from a six-month low of 3.285% reached on Friday and are holding below a 15-year high of 4.338% on Oct. 21.

Two-year yields rose two basis points to 4.101%. They are 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 56 basis points. Fed funds futures traders are now pricing in a 55% chance of a 25 basis points interest rate increase at the Federal Reserve’s May 2-3 meeting.

March 30 Thursday 3:20PM New York / 1920 GMT Price Current Net Yield % Change (bps) Three-month bills 4.695 4.8167 0.044 Six-month bills 4.69 4.8833 -0.012 Two-year note 99-146/256 4.101 0.021 Three-year note 102-12/256 3.8848 0.002 Five-year note 99-212/256 3.6629 -0.012 Seven-year note 100-20/256 3.6123 -0.012 10-year note 99-156/256 3.5469 -0.019 20-year bond 99-224/256 3.8838 -0.033 30-year bond 97-224/256 3.7436 -0.034
DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)
U.S. 2-year dollar swap 32.75 0.25
spread
U.S. 3-year dollar swap 17.50 0.50
spread
U.S. 5-year dollar swap 5.75 -0.25
spread
U.S. 10-year dollar swap -0.75 0.25
spread
U.S. 30-year dollar swap -45.75 1.00
spread

(Reporting by Karen Brettell; Editing by Jonathan Oatis, Will Dunham and Mark Potter)