Treasuries – US Treasury yields fell after a strong auction of 20-year Treasuries
New York – November 20 (Reuters) – Treasury yields fell after strong bidding to sell $16 billion in 20-year Treasury bonds on Monday, indicating that the market still expects inflation to slow and that the Federal Reserve will cut interest rates in June next year.
The Treasury sold 20-year bonds at a high yield of 4.780%, or less than the roughly 4.810% yield the market was trading at in the half-hour before the auction.
“The 20-year auction found a very strong bid, especially after the 30-year auction was so bad a couple of weeks ago,” said Ben Jeffrey, interest rates strategist at BMO Capital Markets in New York, referring to the $30 sale. Annual bonds on November 9 described by analysts as “Terrible” and “ugly”.
He added that concerns remain about the total supply of Treasury bonds and what higher net issuance means for the level of interest rates. The Treasury sold $159 billion of debt on Monday, and plans to auction another $90 billion on Tuesday.
“We are starting to see some strong signs of demand for duration, and the upward flattening of the (yield) curve resonates with that reaction,” Jeffrey said.
Upward flattening occurs when long-term interest rates fall faster than short-term rates and flatten the yield curve, which is seen as a bullish signal for both the stock market and the economy.
Yield on 10-year bonds US10YT = T It fell 1.5 basis points to 4.426%, heading towards the lowest closing level since September 20, while the two-year yield fell. US2YT = t The yield, which reflects interest rate expectations, rose one basis point to 4.917%.
Treasury prices jumped after the 10-year bond yield, which moves inversely with price, reached a 16-year high of 5.021% in late October after Federal Reserve Chairman Jerome Powell warned that the strong U.S. economy could be strong. Ensure stricter financial conditions To reduce inflation.
Data since then have shown the pace of inflation slowing, and bond yields fell as Treasuries rose.
Earlier Monday, the Conference Board’s main economic indicator for October fell 0.8%, or a tenth of a percentage point more than economists in a Reuters poll had expected. The research center expects the US economy to fall into a very short recession.
“The index continues to decline at a rate of about 8% year-on-year, and the breadth and depth of the decline suggests that a sharp decline is still coming,” said Joe LaVorgna, chief U.S. economist at SMBC Nikko Securities in New York. .
“We can debate how hard it is, but this hard landing is still coming,” he said.
The difference between the yield on two- and 10-year bonds US2US10 = Twhich is seen as a harbinger of a recession when short-term bonds are higher than longer-duration bonds, or what is known as an inverted curve, at -49.4 basis points.
The yield on 30-year Treasury bonds US30YT = T It fell 2.7 basis points to 4.570%.
Break-even rate for five-year US Treasury Inflation Protected Securities (TIPS) US5YTIP=RR The latter was at 2.266%.
10-year TIPS break-even rate US10YTIP=RR It was last at 2.308%, suggesting that the market expects inflation to average around 2.3% per year over the next decade.
Five-year inflation-linked US dollar swap USIL5YF5Y=RConsidered by some to be a better measure of inflation expectations due to potential distortions from the Federal Reserve’s quantitative easing, it was most recently at 2.611%.
November 19, 20 Monday 2:31 PM New York / 1931 GMT
price
Current yield %
Net change (basis points)
Three months’ bills US3MT=RR
5.2525
5.4079
0.007
Six months’ bills US6MT = t
5.2175
5.4441
0.026
Two-year note US2YT = t
100-40/256
4.913
0.006
Three-year warrant US3YT=RR
99-250/256
4.6332
-0.006
Five-year note US5YT=RR
101-228/256
4.4441
-0.011
Seven-year note US7YT=RR
102-112/256
4.4624
-0.016
10 year note US10YT = T
100-156/256
4.4237
-0.017
20-year bonds US20YT = T
94-236/256
4.7747
-0.033
30-year bonds US30YT = T
102-240/256
4.569
-0.028
Powell’s policy race and an evolving halt Powell’s policy race and an evolving halt https://tmsnrt.rs/3qQdxgq
(Reporting by Herbert Lash; Editing by Nick Zieminski and Sharon Singleton)
((herb.lash@thomsonreuters.com; 1-646-223-6019; Reuters Messages: herb.lash.reuters.com@reuters.net))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
