Yield curve steepens as market focus turns to technicals
By David Randall NEW YORK, June 23 (Reuters) - Ten-year Treasury yields inched higher in muted trading Wednesday, one day after Federal Reserve Chairman Jerome Powell reaffirmed in congressional testimony the central bank's view that rising inflation will likely be temporary. "We will not raise interest rates preemptively because we fear the possible onset of inflation. We will wait for evidence of actual inflation or other imbalances," Powell said in a hearing before a U.S. House of Representatives panel. At their meeting last week, Fed officials surprised many market participants with a more hawkish tone and suggested that the central bank may raise interest rates as soon as 2023. The yield curve - a measure of expectations of the economy's direction - steepened slightly. The spread between 5 and 30-year Treasury yields rose to 124.60 basis points, well above the 107.80 that it hit Monday. The Fed's policy stance will likely not change until its Jackson Hole meeting in late August, leaving Treasury yields in a narrow trading range, analysts said. "Absent much volatility on Fed rhetoric or even volatility in Treasuries, technicals are set to remain in focus in the interim," said Daniel Krieter, director of fixed income strategy at BMO Capital Markets. The Treasury will auction $61 billion in 5 year notes Wednesday afternoon. The auction is setting up to be underwritten at its highest yield since February 2020, noted Justin Lederer, managing director at Cantor Fitzgerald. The benchmark 10-year Treasury yield rose to 1.4818%, while shorter-term 2-year yields were flat at 0.2484%. Long duration 30-year Treasury yields inched higher to 2.1097%. Price Current Net Yield % Change (bps) Three-month bills 0.045 0.0456 0.003 Six-month bills 0.05 0.0507 0.000 Two-year note 99-193/256 0.2484 -0.003 Three-year note 99-112/256 0.4405 -0.002 Five-year note 99-118/256 0.8618 0.005 Seven-year note 100-38/256 1.2276 0.010 10-year note 101-80/256 1.4818 0.010 20-year bond 103-108/256 2.0398 0.008 30-year bond 105-220/256 2.1097 0.005 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 6.75 -0.25 spread U.S. 3-year dollar swap 9.75 1.25 spread U.S. 5-year dollar swap 7.25 1.00 spread U.S. 10-year dollar swap -3.00 0.50 spread U.S. 30-year dollar swap -33.25 0.50 spread (Editing by Bernadette Baum)
