The yield on two-year Treasuries, which typically moves in step with interest rate expectations, fell 14 basis points to 3.840%, while the benchmark 10-year note's yield slid 9 basis points to 3.342%. Job openings, a measure of labor demand, decreased 632,000 to 9.9 million on the last day of February, the lowest level since May 2021, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report. Job openings were expected to decline to 10.4 million from 10.82 million in January, a Reuters poll of economists showed.
Despite the larger-than-expected drop in job vacancies, the labor market remains tight as there were 1.7 openings for every unemployed person in February, down from 1.9 the prior month. The market's reaction to the data surprised some observers as job openings are a lagging indicator. "I would not put that much weight on job openings if I was going to point to something that suggests that the economy is slowing," said Thierry Wizman, global FX and rates strategist at Macquarie Group Ltd in New York, adding that other data, such as purchasing manager data on Monday, suggests a larger weakening of the economy.
"People were trying to grasp for some indications that something happened in March, post the bank crisis. But of course the JOLTs is from February, not March," he said.
Futures were pricing in the likelihood that the Fed raises its target rate by 25 basis points on May 3 when policymakers conclude a two-day meeting at 43.7%, down from 59.7% late on Monday, CME's FedWatch Tool shows. Chances of a rate cut later this year also rose.
The drop in two-year yields, which have declined more than 100 basis points since Silicon Valley Bank failed on March 10, pushed them below the low end of a wide range around 4% they have hugged since mid-March.
"If we're seeing renewed impetus for inflation moderating that would be a reason for the Treasuries to go lower in yield, and the other possibility, of course, would be due to weaker economic data," said Andrzej Skiba, head of the BlueBay U.S. fixed income team at RBC Global Asset Management in New York.
Earlier on Tuesday, the Reserve Bank of Australia left its cash rate unchanged at 3.6%, snapping 10 straight hikes, saying it wanted to assess the impact of past increases whose effect lags, as the economy slows and inflation has peaked. The yield on the 30-year Treasury bond was
down 4.9 basis points to
3.597
%.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes , seen as an indicator of economic expectations, was at -49.9 basis points.
The breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) was last at
2.398%.
The 10-year TIPS breakeven rate was last at
2.257%, indicating the market sees inflation averaging about
2.3% a year for the next decade.
The U.S. dollar 5 years forward inflation-linked swap , seen by some as a better gauge of inflation
expectations due to possible distortions caused by the Fed's
quantitative easing, was last at 2.474%.
April 4 Monday 3:14 p.m. New York / 1914 GMT 0.75
Price Current Net
Yield % Change
(bps)
Three-month bills 4.63 4.7468 -0.055
Six-month bills 4.685 4.8754 -0.012
Two-year note 99-208/256 3.9738 -0.088
Three-year note 102-118/256 3.7343 -0.096
Five-year note 100-122/256 3.5199 -0.091
Seven-year note 100-228/256 3.4803 -0.081
10-year note 100-160/256 3.4245 -0.066
20-year bond 101-88/256 3.778 -0.045
30-year bond 99-176/256 3.6421 -0.046
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap spread 33.50 1.50
U.S. 3-year dollar swap spread 18.25 0.50
U.S. 5-year dollar swap spread 6.00 0.25
U.S. 10-year dollar swap spread -0.75 -0.25
U.S. 30-year dollar swap spread -42.75 1.75
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Australia pauses rate hikes to assess tightening impact
Australia pauses rate hikes to assess tightening impact ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Herbert Lash; Editing by Ed Osmond and Andrea
Ricci)
