The strong labor data showed the Fed still has work to do in
fighting persistent inflation, after the central bank on
Wednesday hiked rates a further 25 bps.
The upward move in longer-dated Treasury yields marked a
reversal in course from their downward trend throughout the
week, when investors bet that the Federal Reserve would pause
and then cut rates this year.
"I think a lot of that, especially the move across the
curve, reflects the likelihood that the Fed is going to keep
going at a high level for quite a long time, probably longer
than Fed funds futures have been pricing," said Steven Abrahams
of Amherst Pierpont Securities, a broker-dealer owned by
Santander.
The yield curve between two-year and 10-year Treasuries , an indicator of economic conditions, steepened
to negative 47.9 bps.
On Friday, the yield on the one-month T-bill fell 29.2 bps
to 5.447% after earlier rising to 5.739%, a record high. Yields
on two-month and three-month bills also
ticked down.
Investors dumped bills with shorter-dated maturities
earlier this week in the latest sign of nerves about the U.S.
debt ceiling standoff.
Treasury Secretary Janet Yellen said this week that the
government could run out of cash as soon as June 1, as Democrats
and Republicans stand at an impasse.
On Thursday, the Treasury Department auctioned roughly $95
billion in short-term debt at record-high interest rates.
Treasury will hold another auction on May 9 for $40 billion
in three-year notes . The yield on existing three-year
notes rose 18.5 bps on Friday to 3.639%.
The next major economic data point will come on Monday when
the Fed is slated to release its Senior Loan Officer Opinion
Survey, which will show the state of credit conditions in the
first quarter.
"I think the market is probably giving a lot of weight to
tightening credit conditions - that's the wild card now,"
Abrahams said.
May 5 Friday 2:57PM New York / 1857 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 5.1125 5.2484 -0.020
Six-month bills 4.9 5.0914 0.088
Two-year note 99-232/256 3.9243 0.197
Three-year note 100-78/256 3.639 0.185
Five-year note 100-92/256 3.4207 0.145
Seven-year note 100-116/256 3.4263 0.120
10-year note 100-108/256 3.4483 0.096
30-year bond 97-136/256 3.7633 0.041
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 25.25 -1.00
spread
U.S. 3-year dollar swap 15.75 -0.75
spread
U.S. 5-year dollar swap 10.25 0.00
spread
U.S. 10-year dollar swap 2.25 -0.25
spread
U.S. 30-year dollar swap -41.75 -0.75
spread
(Reporting by Matt Tracy; Editing by Nick Macfie, Andrea Ricci
and Cynthia Osterman)
