CASH-Yields rise as market considers debt ceiling and jobs data

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By Karen Pierog CHICAGO, October 4 (Reuters) – U.S. Treasury yields rose on Monday as the market worried about the absence of a debt ceiling in the U.S. Congress and eagerly awaited the release later this week employment data, which could set the stage for lower Federal Reserve asset purchases. The benchmark 10-year yield, which reached its highest level since June at 1.567% last week, last increased 2.4 basis points to 1.491%. Yields at the shorter end of the curve remained elevated as the US Treasury on October 18 considered it could run out of liquidity, potentially leading to default, with no debt ceiling resolution. The yield on one-month Treasury bills, which climbed to 0.1240% on Friday, peaked at 0.112% on Monday. Republicans have so far refused to help Democrats, who control Congress and the White House, suspend or increase the debt ceiling after its two-year suspension ends in late July. George Goncalves, head of US macro strategy at MUFG in New York City, said with a debt ceiling showdown looming, the market is still facing higher yields from last week. “Until proven otherwise, people are going to be on the defensive because the weaker longs that took these positions during the rate trading between August and early September, they’re underwater and I don’t think any the world will be able to implement this positioning in a matter of a week, “he said. The market’s primary focus is on Friday’s September jobs report. Fed Chairman Jerome Powell said the central bank could start cutting its $ 120 billion monthly bond purchases in November as long as U.S. job growth through September is “reasonably strong”. Gonçalves said the market is bracing for a decent jobs report that would meet the Fed’s criteria for the cut. “It must be a really incredible number to get us out of the peak (in the 10-year Treasury yield) that we saw last week,” he added. The yield on five-year bonds, more sensitive to intermediate interest rate hikes, last increased 1.6 basis points to 0.949%. A closely watched part of the yield curve that measures the spread between two-year and ten-year Treasury bill yields was 1.68 basis points steeper at 121.44 basis points. October 4 Monday 10:23 a.m. New York / 1423 GMT Price Current net yield% Change (bp) Three-month bills 0.0375 0.038 0.000 Six-month bills 0.05 0.0507 0.000 Two-year note 99-241 / 256 0.2796 0.016 Three-year note 99 -160/256 0.5034 0.018 5-year bond 99-164 / 256 0.949 0.016 7-year bond 99-204 / 256 1.2805 0.020 10-year bond 97-204 / 256 1.491 0.024 Bond 20-year 95-204 / 256 2.0076 0.027 30-year bond 98-128 / 256 2.0675 0.028 SPREADS DOLLAR SWAP Last (bps) Net change (bps) 2-year US dollar swap 9.50 -1.25 spread swap 3-year US dollar 13.50 -0.75 5-year US dollar swap spread 8.00 -0.75 10-year US dollar swap spread 1.00 -0.50 30-year US dollar swap spread -26.75 – 0.25 spread (Reporting by Karen Pierog; Editing by Dan Grebler)


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