TREASURIES-Long-term yields slide ahead of Fed Chair Powell's remarks

(Updates with additional comments, economic data) By Matt Tracy May 3 (Reuters) - Long-term Treasury yields drifted lower on Wednesday while yields on shorter-dated bills ticked up, as the market awaited remarks later on Wednesday from Federal Reserve Chair Jerome Powell. The yield on 10-year Treasury bonds fell 4.6 basis points from Tuesday's close to 3.393%, their lowest since April 7. The 30-year bond's yield declined 4.3 bps to 3.689%. while the two-year yield dipped 2.6 bps to 3.953%. Demand for longer-dated paper grew as the yield on two-month bills jumped 30 bps to 5.257% on rising concerns that the government could hit its debt limit by June 1. The one-month bill's yield climbed 5.6 bps to 4.449%, its highest since April 10. The three-month yield remained flat from Tuesday at 5.222%. After the U.S. central bank ends its Federal Open Market Committee meeting on Wednesday, Powell is expected to signal an eventual softening of monetary policy after more than a year of interest rate hikes to fight inflation. This follows the failure of First Republic Bank in March and this week's sell-off in shares of other regional banks.

"I think the market was really pricing in some strong accommodation from the Fed in the second half of the year," said Blair Shwedo, head of investment grade trading at U.S. Bank.

Powell's remarks will come after a slew of economic data released this week. Private payrolls rose 296,000 in April, higher than expected, according to data published Wednesday by ADP Research Institute. Data from ISM showed the services sector expanded in April for the fourth straight month. On Tuesday, data showed new job openings in March dropped to their lowest level since May 2021, a day after news of slightly stronger-than-expected purchasing in the manufacturing sector. "When we're looking at data that we've seen so far for April, that's been a bit more mixed," said Andrzej Skiba, head of BlueBay U.S. Fixed Income at RBC Global Asset Management. "So from the Fed's perspective, it very much would underline the need for a pause after this."

The yield curve between two-year Treasury notes and 10-year bonds , a reliable indicator of expectations for the economy, was last inverted negative 55.7 bps. On Thursday, the Treasury Department is slated to auction $50 billion in four-week bills and $45 billion in eight-week bills . The yield on existing four-week bills remained unchanged, while the yield on eight-week bills ticked up 4.6 bps to 5.128%. Treasury said on Wednesday it plans to keep coupon issuance across all maturities through July as the outlook for the U.S. debt limit remains uncertain, announcing total quarterly refunding of $96 billion. Sales of $40 billion in U.S. three-year notes, $35 billion in 10-year notes, and $21 billion in 30-year bonds are slated for next week, unchanged from the last refunding announcement. On Friday, the government is scheduled to release its latest nonfarm payroll employment figures, which will further help the Fed determine its course for rates.
May 3 Wednesday 10:42AM New York / 1442 GMT Price Current Net Yield % Change (bps) Three-month bills 5.0825 5.2202 -0.007 Six-month bills 4.825 5.0143 -0.006 Two-year note 99-227/256 3.9346 -0.045 Three-year note 100-82/256 3.6339 -0.059 Five-year note 100-118/256 3.3987 -0.067 Seven-year note 100-184/256 3.3836 -0.065 10-year note 101 3.3787 -0.060 30-year bond 99-32/256 3.6733 -0.059
DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)
U.S. 2-year dollar swap 27.00 -1.25
spread
U.S. 3-year dollar swap 17.00 0.00
spread
U.S. 5-year dollar swap 10.25 0.50
spread
U.S. 10-year dollar swap 3.25 1.00
spread
U.S. 30-year dollar swap -40.00 1.00
spread

(Reporting by Matt Tracy; Editing by Nick Macfie and Richard Chang)