Softening inflation data has added to expectations that the Fed is closer to ending its tightening cycle and the economy is expected to slow as a result of higher rates.
Growth remains relatively solid for now, however, indicating that a recession is unlikely at least for the near-term. That could keep the Fed on a tightening path, or at least likely to maintain rates at high levels. "It will take time and we’re still in the early phases of slowing," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia. Investors will focus on comments from Fed speakers this week for any new indications on whether further rate hikes are likely after May. The officials will enter into a blackout period from April 22 ahead of the Fed’s May 2-3 meeting.
Fed Governor Christopher Waller said on Friday that U.S. central bankers "haven't made much progress" in returning inflation to their 2% target and need to move interest rates higher still. Yields rose on Friday after some components of retail sales data for March were not as weak as feared, even though sales fell during the month. The data also still pointed to a strong first quarter.
"The March retail numbers weren’t great or anything, but after inflation consumer spend remains pretty buoyant," LeBas said. Yields hit session highs on Monday after the NY Empire State Manufacturing index unexpectedly rose in April.
Yields were also due for a bounce after dropping sharply in
March. Benchmark 10-year yields rose 4 basis points
to 3.560% on Monday, and are up from a seven-month low of 3.253%
on April 6.
Two-year yields gained 5 basis points to 4.150%.
The yield curve between two-year and 10-year notes was little changed on the day at minus 59 basis
points.
April 17 Monday 9:54AM New York / 1354 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 5.01 5.1411 0.045
Six-month bills 4.86 5.062 0.039
Two-year note 99-125/256 4.1498 0.047
Three-year note 99-160/256 3.8839 0.045
Five-year note 99-220/256 3.656 0.045
Seven-year note 100-24/256 3.6094 0.044
10-year note 99-128/256 3.5603 0.038
20-year bond 99-200/256 3.8906 0.040
30-year bond 97-92/256 3.773 0.036
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 30.00 0.50
spread
U.S. 3-year dollar swap 19.00 1.00
spread
U.S. 5-year dollar swap 6.50 -0.25
spread
U.S. 10-year dollar swap -2.25 -0.75
spread
U.S. 30-year dollar swap -44.00 -0.75
spread
(Reporting by Karen Brettell, editing by Ed Osmond)
