The move upward in longer-dated Treasury yields marks 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. Friday's 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. "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, last stood at negative 46 bps. The yield on the one-month T-bill on Friday fell 25.3 bps to 5.486% after earlier rising to 5.739% and beating out its Thursday peak, a 22-year high. Investors dumped bonds with shorter-term 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. The Treasury Department on Thursday auctioned roughly $95 billion in short-term debt at record-high interest rates.
On Friday, Treasury will auction $40 billion in three-year notes . The yield on existing three-year notes rose 16.8 bps on Friday to 3.622%. The next major economic datapoint 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 10:27AM New York / 1427 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 5.1225 5.2587 -0.009
Six-month bills 4.8825 5.0728 0.070
Two-year note 99-244/256 3.8995 0.172
Three-year note 100-90/256 3.6221 0.168
Five-year note 100-106/256 3.4087 0.133
Seven-year note 100-136/256 3.4137 0.108
10-year note 100-128/256 3.4389 0.087
30-year bond 97-124/256 3.766 0.044
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 25.00 -1.25
spread
U.S. 3-year dollar swap 14.75 -1.75
spread
U.S. 5-year dollar swap 10.00 -0.25
spread
U.S. 10-year dollar swap 2.25 -0.25
spread
U.S. 30-year dollar swap -42.00 -1.00
spread
(Reporting by Matt Tracy; Editing by Nick Macfie)
