April 13, 2018 / 7:25 PM / 8 days ago

TREASURIES-U.S. yield curve hits flattest level in over a decade

    * Fed's Rosengren sees perhaps three more rate hikes in 2018
    * JOLTS, U. Michigan consumer sentiment data weaken
    * U.S. Treasury asks dealers about selling more TIPS 
    * U.S. 2-year yield reaches highest level since Sept. 2008

 (Updates markets action, adds quote)
    By Richard Leong
    NEW YORK, April 13 (Reuters) - The U.S. Treasury yield curve
hovered at its lowest level in more than a decade on Friday as
short-dated yields rose more than longer-dated ones this week on
expectations of further interest rate increases from the Federal
Reserve.
    Minutes from the U.S. central bank's policy meeting last
month, which were released on Wednesday, showed most Fed
officials were confident inflation is moving toward their
desired 2-percent goal as the economy improves.
    "It's been a relentless flattening move all week," said
Gennadiy Goldberg, interest rate strategist at TD Securities in
New York.
    Investors prefer longer-dated bonds over shorter-dated
issues as the Fed raises short-term rates.
    Boston Federal Reserve President Eric Rosengren said Friday
the central bank will probably need to raise interest rates
three more times in 2018 in response to a robust economy,
following a quarter-point rate hike in March.
    Meanwhile, St. Louise Fed chief James Bullard downplayed the
recent pickup in inflation data.
    Some analysts said the yield curve may end up inverting if
it flattens further. When shorter-dated yields rise above
longer-dated ones, this market phenomenon has been a reliable
gauge of a U.S. recession.
    The yield gap on five-year and 30-year Treasuries
 flattened 1.1 basis points to 36.30 basis points
after touching 35.30 basis points, the flattest level since
September 2007, Reuters data showed.
    Long-dated yields, in the meantime, notched higher on this
week's Treasury supply, although the rise has been capped by
safe-haven demand on worries about a U.S. strike against Syria.

    The U.S. Treasury sold a combined $64 billion worth of
three-year, 10-year and 30-year securities to fair demand this
week.
    The Treasury released its quarterly survey to primary
dealers where it asked whether it should sell more Treasury
Inflation Protected Securities (TIPS).
    Overall yield levels were narrowly mixed as Wall Street
stocks slipped, as quarterly results from large banks led by
JPMorgan failed to stoke investor enthusiasm.

    The yield on 10-year Treasury notes was down 1.1
basis points to 2.823 percent. 
    Two-year Treasury note yields were up 1.7 basis
points to 2.365 percent after hitting 2.373 percent earlier
Friday, which was the highest since Sept. 2008.
    On the data front, the government said domestic job openings
fell to 6.052 million in February from a record high of 6.228
million in January.
    The University of Michigan said its reading on U.S. consumer
sentiment fell to 97.8 in early April, down from a 14-year peak
of 101.4 in late March.
 April 13 Friday 2:49PM New York / 1849 GMT
                               Price                   
 US T BONDS JUN8               145-18/32    0-6/32     
 10YR TNotes JUN8              120-140/256  0-20/256   
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             1.7275       1.7588     0.013
 Six-month bills               1.915        1.9602     0.010
 Two-year note                 99-200/256   2.3648     0.017
 Three-year note               99-162/256   2.5029     0.008
 Five-year note                99-56/256    2.6692     -0.002
 Seven-year note               99-18/256    2.7728     -0.008
 10-year note                  99-96/256    2.823      -0.011
 30-year bond                  99-104/256   3.0302     -0.010
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        31.25        -0.75     
 spread                                                
 U.S. 3-year dollar swap        24.75        -0.75     
 spread                                                
 U.S. 5-year dollar swap        13.25         0.00     
 spread                                                
 U.S. 10-year dollar swap        3.75         0.00     
 spread                                                
 U.S. 30-year dollar swap      -13.25        -0.50     
 spread                                                
 
   

    
 (Reporting by Richard Leong
Editing by Nick Zieminski and Chizu Nomiyama)
  
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