US TREASURY yields increase; investors expect Fed clues on taper schedule


 (Adds Fed repo facility results, updates prices)
    By Rodrigo Campos
    NEW YORK, Sept 17 (Reuters) - U.S. government bond yields
edged up on Friday, with the 10-year yield touching a two-month
high, as traders look ahead to a busy week of central bank
meetings including a key one at the Federal Reserve.
    The 10-year yield briefly touched 1.3855%, its highest level
since July 14, and was set for a fourth consecutive week of
increases, the longest such streak since March.
    Investors hope to get more clarity from the Fed regarding
the schedule for slowing down its asset purchases, which will
also give a rough timeline for when the next rate increase could
come.
    The Fed is expected to tie any policy decision to U.S. job
growth in September and beyond.
    Other than the Fed's two-day meeting ending on Wednesday,
the central banks of China, Japan, Sweden, Brazil, the United
Kingdom and Turkey are among those scheduled to meet next week
to discuss monetary policy.  
    "My sense is that nobody really wants to be particularly
aggressively positioned" going in to next week, said Guy LeBas,
chief fixed income strategist at Janney.
    He said the Treasury market was "slowly bleeding out the CPI
rally" that took yields to three-week lows earlier in the week.
    The yield on 10-year Treasury notes was up 3.9
basis points at 1.3702%. 
    The yield on the 30-year Treasury bond was up
2.6 basis points at 1.9071%.
    The Fed’s reverse repo facility, which offers approved money
managers the option to lend money overnight to the U.S. central
bank in return for Treasury collateral, set a record $1.218
trillion on Friday. Borrowing rates in the overnight repurchase
agreement market were at five basis points.
    A record amount in the reverse repo speaks to an abundance
of cash in bank coffers with nowhere to go.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 114.2 basis points. 
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 0.9 basis
points at 0.226%.
    The U.S. government will auction $24 billion in 20-year
bonds on Sept. 21 and $14 billion 10-year TIPS on Sept. 23 in
reopenings that will both settle on Sept. 30.

        
    September 17 Friday 3:20PM New York / 1920 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0375       0.038     0.003
 Six-month bills               0.045        0.0456    0.000
 Two-year note                 99-206/256   0.2257    0.009
 Three-year note               99-180/256   0.4752    0.018
 Five-year note                99-110/256   0.8681    0.034
 Seven-year note               99-182/256   1.1684    0.038
 10-year note                  98-228/256   1.3702    0.039
 20-year bond                  98-68/256    1.8546    0.035
 30-year bond                  102-28/256   1.9071    0.026
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        10.75         0.00    
 spread                                               
 U.S. 3-year dollar swap        12.00        -0.25    
 spread                                               
 U.S. 5-year dollar swap        10.50         0.25    
 spread                                               
 U.S. 10-year dollar swap        4.00         0.50    
 spread                                               
 U.S. 30-year dollar swap      -22.75         0.75    
 spread (Reporting by Rodrigo Campos in New York
Editing by Matthew Lewis and David Gregorio)
  
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