CASH-Most Yields Fall Following Fourth Quarter Repositioning


(Updates with market activity, details on short-term debt, Fitch comments) By Ross Kerber Oct 1 (Reuters) – Traders lowered long-term US Treasury yields on Friday as they were repositioning for the fourth quarter of the year, although Washington’s fiscal battles sent short-term debt yields higher. The benchmark 10-year rate lost 5 basis points to 1.4771%. It had hit 1.51% overnight, but stabilized despite positive economic data showing US consumer spending rose more than expected in August. “We have suffered a slight setback, I think it’s more technical than fundamental in nature,” said Kevin Flanagan, head of bond strategy at WisdomTree Asset Management. Investors were buying Treasuries after a massive sell-off that began on September 23 when the US Federal Reserve and European central banks turned to higher interest rates, he said. Flanagan and others have described the high-stakes budget brawl in Washington as having little effect on the public debt market. The Democrat-controlled US Congress struggled to move President Joe Biden’s agenda on Friday, with House progressives vowing to block a $ 1,000 billion infrastructure bill without a deal on a project larger law on social spending and climate change. An exception has been the near-maturity bond market, as Treasury Secretary Janet Yellen estimated that a historic US debt default could occur around October 18 if Congress does not act. The yield on a U.S. Treasury bill maturing Oct. 19, for example, reached as high as 0.15% on Friday and was last at 0.1014%, even higher than any day before since issue of the voucher in June. Fitch Ratings said on Friday that the United States’ AAA sovereign credit rating could come under pressure if federal lawmakers fail to settle the debt ceiling in a timely manner. A closely watched portion of the U.S. Treasury yield curve measuring the spread between two-year and ten-year Treasury bill yields, seen as an indicator of economic expectations, was 121 basis points, roughly the same as ‘at the close of Thursday. The two-year US Treasury yield, which typically moves with interest rate expectations, fell 2.3 basis points to 0.2657%. October 1 Friday 2:15 p.m. New York / 6:15 p.m. GMT Price Current net return% change (bp) Three-month bills 0.0375 0.038 0.000 Six-month bills 0.05 0.0507 0.000 Two-year note 99-248 / 256 0.2657 -0.023 Three-year note 99-168 / 256 0.4926 -0.031 Five-year bond 99-180 / 256 0.936 -0.059 Seven-year bond 99-230 / 256 1.2652 -0.060 10-year bond 97-236 / 256 1.4771 -0.050 20-year bond 95- 252/256 1.9958 -0.038 30-year bond 98-188 / 256 2.0569 -0.034 SPREADS DOLLAR SWAP Last (bps) Net change (bps) 2-year US dollar swap 10 , 50 spread 0.75 3-year US dollar swap 14.25 0.75 US spread 5 -year dollar swap 8.75 0.25 US dollar swap spread 1.50 -0.50 30-year US dollar swap spread -26, 50 -1.00 spread (Reporting by Ross Kerber in Boston; editing by Nick Macfie, Kirsten Donovan)

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