By Karen Brettell
NEW YORK, May 10 (Reuters) - U.S. Treasury yields fell
on Wednesday after consumer price data for April came in roughly
in line with economists' expectations, a relief to some
investors who were concerned that price pressures may have been
stronger than expected.
In the 12 months through April, the Consumer Price Index
(CPI) increased 4.9% after advancing 5.0% on a year-on-year
basis in March. The core CPI gained 5.5% after advancing by 5.6%
in March.
“It came in actually as expected, but I think there may have
been people looking for a stronger number, so that’s why we had
a decent reaction," said Priya Misra, head of global rates
strategy at TD Securities in New York.
Benchmark 10-year note yields fell around 5
basis points to 3.462%, while two-year yields dropped
around 12 basis points to 3.949%. The inversion in the yield
curve between two-year and 10-year notes narrowed
to minus 49 basis points.
The Federal Reserve is seen as likely to leave rates
unchanged when it meets in June unless there is a surprise
resurgence in price pressures. The CPI report for May is due on
June 13, one day before the Fed will conclude its two-day
meeting.
Fed funds futures traders are currently pricing in an 86%
likelihood that the Federal Reserve will leave rates unchanged
at its June meeting, and 14% odds of an additional 25 basis
points hike. Ongoing concerns about the U.S. regional banking sector and
the debt ceiling standoff, if it is not resolved, could also
make the U.S. central bank more likely to pause rate hikes.
One-month Treasury bill yields also hit a record
high of 5.811% earlier on Wednesday as some investors avoided
U.S. government debt that comes due when the Treasury could run
out of funds, as Congress continues to negotiate on raising the
debt ceiling.
President Joe Biden and top lawmakers agreed on Tuesday to
further talks aimed at breaking a deadlock over raising the
$31.4 trillion U.S. debt limit, with just three weeks before the
country may be forced into a default.
The Treasury will sell $35 billion in 10-year notes on
Wednesday, the second auction of $96 billion in coupon-bearing
supply this week. The government saw strong demand for $40
billion in three-year notes on Tuesday. It will also sell $21
billion in 30-year bonds on Thursday.
May 10 Wednesday 9:04AM New York / 1304 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 5.1175 5.2566 -0.024
Six-month bills 4.935 5.1456 -0.013
Two-year note 99-219/256 3.9514 -0.073
Three-year note 100-8/256 3.6139 -0.075
Five-year note 100-96/256 3.4171 -0.078
Seven-year note 100-112/256 3.4288 -0.071
10-year note 100-80/256 3.4616 -0.060
20-year bond 99-196/256 3.8918 -0.040
30-year bond 96-176/256 3.8118 -0.037
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 21.75 0.00
spread
U.S. 3-year dollar swap 17.25 3.25
spread
U.S. 5-year dollar swap 9.25 0.50
spread
U.S. 10-year dollar swap 0.75 0.50
spread
U.S. 30-year dollar swap -43.25 0.25
spread
(Reporting by Karen Brettell; Additional reporting by Herb Lash
in New York; Editing by Andrew Heavens and Andrea Ricci)
