Benchmark 10-year yields, which are trading below those on shorter-dated debt, are continuing to show concerns about economic growth. "The long-end is signaling that there is economic trouble up ahead, or current economic trouble," said Brien. "When there’s a bid for Treasuries, part of that bid is from enterprises or investors not deploying that money in the real world - not building a factory, not expanding a business. And so it's not just an opinion but it's also a function of the real-world activity."
Investors are evaluating whether the Fed is likely to continue to hike rates after an expected 25 basis point increase at its May 2-3 meeting as the U.S. central bank focuses on bringing down inflation. “It’s really about what the Fed says, how they portray the May hike, whether they mention explicitly that it’s the last one, or whether they keep the door open,” said Gennadiy Goldberg, senior interest rate strategist at TD Securities in New York. Ten-year Treasury yields were last at 3.572%, up 3 basis points on the day. Two-year yields rose 2 basis points to 4.192%. The inversion in the yield curve between two year and 10-year yields was last at minus 62 basis points. Benchmark 10-year yields have risen from seven-month lows touched on April 6 as the banking sector appears to stabilize, following the collapse of two regional banks including Silicon Valley Bank in mid-March. However, the 10-year yields have also failed to break above the 3.65% area, with investors wary to take large short positions in case new negative banking headlines emerge. Traders are also worried about whether the U.S. Congress will raise the debt ceiling in time to avoid a catastrophic default on U.S. debt. “The market is still reluctant to be short, because that exposes them to asymmetric downside risk in the event of any bad headlines,” said Goldberg. “What we’ve seen is more buying on dips; when rates rise, we’ve seen investors come in and be more willing to be long Treasuries.”
One-month Treasury bill yields traded near six-month lows as investors seek out short-term debt that matures before the Treasury is expected to reach its debt limit. Bills have been in demand on concerns about the safety of bank deposits as a result of recent banking stress. But some investors want to avoid debt that will mature when there is a risk that the United States could hit its debt ceiling, which is seen as most likely to occur in late July or August. The one-month bills were last at 3.285%. The cost to insure Treasuries in the credit default swap market also rose to its highest level in a decade, with five-year contracts at 51 basis points.
April 21 Friday 3:00PM New York / 1900 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 4.9725 5.1029 0.002
Six-month bills 4.8575 5.06 0.001
Two-year note 99-106/256 4.1922 0.022
Three-year note 99-152/256 3.8956 0.020
Five-year note 99-208/256 3.6665 0.026
Seven-year note 100-8/256 3.6196 0.026
10-year note 99-104/256 3.5718 0.027
20-year bond 99-140/256 3.9077 0.029
30-year bond 97-64/256 3.7793 0.026
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 27.25 -1.00
spread
U.S. 3-year dollar swap 17.25 -0.75
spread
U.S. 5-year dollar swap 7.75 0.50
spread
U.S. 10-year dollar swap -0.25 0.75
spread
U.S. 30-year dollar swap -40.75 0.50
spread
(Reporting by Karen Brettell; Editing by Susan Fenton, Nick Zieminski and Jonathan Oatis)
