TREASURIES-Yields tumble on signs of slowing US inflation

Kitco Media
By Reuters
Published:
Updated:
Reuters
(Adds analyst quote, updates market activity) By David Randall NEW YORK, April 28 (Reuters) - Treasury yields fell across the board Friday after data showed that the pace of inflation was slowing and consumer spending remained steady.


The personal consumption expenditures (PCE) price index gained 0.1% in March after rising 0.3% in February, leaving it up 4.2% over the last 12 months compared with a 5.1% annual gain in February.


The unchanged reading in consumer spending last month, meanwhile, followed a downwardly revised 0.1% gain in February. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 6.4 basis points at 4.033%. The yield on 10-year Treasury notes was down 8.5 basis points to 3.443%, while the yield on the 30-year Treasury bond was down 8 basis points to 3.676%.


Bond yields move in the opposite direction of prices.


“Today’s numbers indicate what the trend has been, which is lower inflation," said Peter Cardillo, chief market economist at Spartan Capital Securities. "It’s still high but it’s something that the Fed needs to take into consideration.” Still, the bond market appeared to remain concerned about a possible showdown over the U.S. debt ceiling. One-month Treasury yields, which spiked higher Thursday on rising concerns of a U.S. debt ceiling showdown, dipped 4 basis points to 4.19%.


"You see lots of weird things going on because people are positioning their portfolios to get ready with the debt ceiling looming," said Jamie Cox, managing partner for Harris Financial Group. "We are staring down the teeth of the beginning of a recession so we don't think yields are going to rise much from here."


The Federal Reserve is widely expected to increase benchmark rates by 25 basis points at the conclusion of its policy meeting next week. Markets are pricing in a 26% chance of another 25 basis point increase in June, a level that remained unchanged after Friday's inflation data.


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 -59.8 basis points.


April 28 Friday 10:44AM New York / 1444 GMT Price Current Net Yield % Change (bps) Three-month bills 5.015 5.147 -0.048 Six-month bills 4.86 5.0627 0.006 Two-year note 99-170/256 4.0517 -0.045 Three-year note 99-242/256 3.7692 -0.057 Five-year note 99-212/256 3.5378 -0.064 Seven-year note 99-248/256 3.5051 -0.068 10-year note 100-88/256 3.4579 -0.070 20-year bond 100-208/256 3.8158 -0.068 30-year bond 98-216/256 3.6891 -0.067
DOLLAR SWAP SPREADS


Last (bps) Net


Change


(bps)
U.S. 2-year dollar swap 28.00 -0.50
spread
U.S. 3-year dollar swap 17.00 0.50
spread
U.S. 5-year dollar swap 8.25 0.75
spread
U.S. 10-year dollar swap 0.50 0.50
spread
U.S. 30-year dollar swap -41.75 0.75
spread



(Reporting by David Randall; Editing by Kirsten Donovan and Hugh Lawson)

Messaging: david.randall.thomsonreuters.com@reuters.net))
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.