June 10, 2020 / 7:11 PM / 22 days ago

TREASURIES-Yields fall as Fed commits to low rates, leaves bond purchases unchanged

 (Recasts with Fed statement, adds quote, updates prices)
    By Karen Brettell
    NEW YORK, June 10 (Reuters) - U.S. Treasury yields fell on
Wednesday after the Federal Reserve repeated its promise of
continued extraordinary support for the economy and kept the
size of its bond purchase program unchanged.
    Policymakers projected a 6.5% decline in gross domestic
product this year and a 9.3% unemployment rate at year's end.
The Fed also said it would maintain bond purchases at "the
current pace" of around $80 billion per month in Treasuries and
$40 billion per month in agency and mortgage backed securities.

    "Generally the Fed's signals were in line with
expectations," said Jon Hill, an interest rate strategist at BMO
Capital Markets in New York. "They acknowledged that
unemployment's going to be high, inflation is going to be low
and they are going to keep interest rates very low for at least
the next two years."
    Benchmark 10-year Treasury yields fell 9 basis
points to 0.744%. Two-year yields, which are the most
sensitive to interest rate changes, fell 3 basis points to
0.177%.
    The Fed did not comment in its statement on whether it was
likely to undertake yield curve control as part of its efforts
to keep rates near zero for the next few years.
    Fed Chairman Jerome Powell said in a press conference that
the U.S. central bank reviewed yield curve control at the
meeting, adding that its effectiveness was still an "open
question."
    The Fed will make decisions on policies including yield
curve control as it gains a better understanding of the
economy's trajectory, Powell added.
    Expectations that the Fed will cap short-dated Treasury
yields has increased demand for trades that benefit from yield
curve steepening. Investors are betting that short-term rates
will be held down by the Fed's low rate policy, while long-dated
debt will be hurt by improving economic expectations and
increasing Treasury supply.
    The yield curve between two-year and 10-year notes
 flattened to 57 basis points. It reached 72 basis
points on Friday, the steepest since March, after data showed
the U.S. economy unexpectedly added jobs in May.
    The curve between five-year notes and 30-year bonds
 was last at 118 basis points, after reaching 129
basis points on Friday, the steepest since December 2016.
    U.S. data on Wednesday showed U.S. consumer prices fell for
a third straight month in May and underlying inflation was weak

 10 Wednesday 2:54PM New York / 1854 GMT
                               Price                  
 US T BONDS SEP0               176          1-22/32   
 10YR TNotes SEP0              138-132/256  0-204/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.17         0.1729    0.001
 Six-month bills               0.1825       0.1852    -0.003
 Two-year note                 99-230/256   0.1767    -0.029
 Three-year note               100-30/256   0.2108    -0.052
 Five-year note                99-154/256   0.3309    -0.076
 Seven-year note               99-156/256   0.5572    -0.090
 10-year note                  98-220/256   0.7444    -0.085
 20-year bond                  97-4/256     1.2954    -0.069
 30-year bond                  93-172/256   1.5137    -0.070
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50         0.25    
 spread                                               
 U.S. 3-year dollar swap         6.50         1.25    
 spread                                               
 U.S. 5-year dollar swap         5.75         1.25    
 spread                                               
 U.S. 10-year dollar swap       -0.75         1.00    
 spread                                               
 U.S. 30-year dollar swap      -46.25         1.00    
 spread                                               
                                                      
 


 (Editing by Nick Zieminski and Richard Chang)
  
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below