(Adds details, quotes, updates prices)
By Karen Brettell
NEW YORK, March 31 (Reuters) - Longer-dated U.S.
Treasury yields dipped and the closely watched inversion between
two-year and 10-year yields narrowed on Friday after data showed
that inflation showed signs of cooling in February, even as it
remained elevated.
The personal consumption expenditures (PCE) price index
increased 0.3% last month after accelerating 0.6% in January. In
the 12 months through February, the PCE price index advanced
5.0% after rising 5.3% in January.
Excluding the volatile food and energy components, the PCE
price index climbed 0.3% after increasing 0.5% in January. The
so-called core PCE price index rose 4.6% on a year-on-year basis
in February after gaining 4.7% in January.
The data “show that maybe we are seeing some sort of a
slowing of the economy, or some kind of relief in the pressure
from inflation,” said Michael Lorizio, senior fixed income
trader at Manulife Investment Management in Boston.
Still, fed funds futures traders are maintaining slightly
higher odds that the Federal Reserve will raise interest rates
by 25 basis points when it meets on May 2-3, rather than leave
them unchanged. “The number remains elevated far from their target, far from
where they envision it ending the year, so I do think that if
the overall tone is supportive of a rate hike, then their
preference would be to hike 25 basis points in May,” said
Lorizio.
“That being said ... there is so much data between now and
May 3, none of us really know what that data will look like or
what’s next in terms of headlines coming out of the banking
sector,” he added.
Treasury yields have stabilized following sharp drops after
the collapse of Silicon Valley Bank and Signature Bank earlier
this month.
But investors remain wary of any renewed stress in the
banking system as they also wait to see how tighter lending
standards resulting from the recent bank failures will affect
the economy.
Benchmark 10-year yields fell 3 basis points on
the day to 3.524%. They are up from a six-month low of 3.285%
reached on Friday and holding below a 15-year high of 4.338% on
Oct. 21.
Two-year yields were up two basis points on the
day at 4.118%, but they pared the increase after reaching 4.172%
before the data. 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 yield curve between two-year and 10-year notes was last at minus 59 basis points.
March 31 Friday 9:30AM New York / 1330 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 4.6925 4.8122 -0.002
Six-month bills 4.735 4.9293 0.043
Two-year note 99-138/256 4.1182 0.019
Three-year note 102-8/256 3.8884 0.006
Five-year note 99-220/256 3.656 -0.007
Seven-year note 100-38/256 3.6008 -0.014
10-year note 99-204/256 3.5242 -0.027
20-year bond 100-68/256 3.8555 -0.035
30-year bond 98-108/256 3.7127 -0.033
Be DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 32.00 -1.00
spread
U.S. 3-year dollar swap 17.25 0.00
spread
U.S. 5-year dollar swap 5.75 0.25
spread
U.S. 10-year dollar swap -1.00 0.00
spread
U.S. 30-year dollar swap -45.25 0.75
spread
(Reporting by Karen Brettell; Editing by Kirsten Donovan and
Jonathan Oatis)
