Credit: REUTERS/DADO RUVICBy Chuck Mikolajczak
Sept 23 - U.S. Treasury yields edged higher on Wednesday as comments from a flurry of Federal Reserve officials reinforced the central bank's recently announced policy stance.
The yield on the 10-year remained within the 6-basis-point range it has held since the Fed's most recent policy statement on Sept. 16. On Wednesday, Fed Vice Chair Richard Clarida said policymakers "are not even going to begin thinking" about raising interest rates until inflation hits 2%, comments aimed at cementing the public's understanding of the central bank's new approach to monetary policy.
Cleveland Federal Reserve Bank President Loretta Mester said the economy has rebounded more strongly than expected since businesses began to reopen a few months ago, but the recovery is not broad-based or sustainable and monetary policy will need to remain accommodative for several years.
Adding to the chorus was Chicago Federal Reserve President Charles Evans, who said the central bank will keep rates at zero until the economy reaches full employment, inflation is "sustainably" at 2% and the Fed is confident it will overshoot that goal.
"The Fed is trying to make sure they don’t really move markets here," said Gennadiy Goldberg, interest rates strategist at TD Securities in New York.
"We are still trying to figure out exactly what the next steps are on Capitol Hill. ... It certainly is kind of a waiting and watching type of environment."
On Tuesday, the Democratic-led U.S. House of Representatives passed a stopgap funding bill to keep the federal government operating through Dec. 11 after striking a deal with Republicans. However, another round of coronavirus aid remains stalled.
The yield on 10-year Treasury notes US10YT=RR was up 1.3 basis points at 0.677 percent.
Fed Chair Jerome Powell said both the U.S. Congress and the Fed need to "stay with it" in as they engage in buttressing the economic recovery.
In U.S. economic data, IHS Markit said its flash U.S. Composite PMI Output Index for September slowed to 54.4 from 54.6 in the prior month, while the housing market remains a bright spot, as the July Federal Housing Finance Agency house price index climbed by 1% on a seasonally adjusted basis.
Bidding for an afternoon auction of $53 billion worth of 5-year notes was described as strong by analysts, with dealers accounting for 20.7% of accepted bids compared to 26% on average, according to a note from Ben Jeffery of BMO Capital Markets.
The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 0.5 basis points at 0.141 percent.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=RR, seen as an indicator of economic expectations, was at 53.5 basis points, rebounding from a two-week low of 51.2 hit on Monday.
September 23 Wednesday 2:04PM New York / 1804 GMT
Price
US T BONDS DEC0 UScv1
176-14/32
-0-8/32
10YR TNotes DEC0 TYcv1
139-128/256
-0-32/256
Price
Current Yield %
Net Change (bps)
Three-month bills US3MT=RR
0.0975
0.0989
0.000
Six-month bills US6MT=RR
0.105
0.1065
-0.002
Two-year note US2YT=RR
99-248/256
0.1406
0.005
Three-year note US3YT=RR
99-230/256
0.1592
0.008
Five-year note US5YT=RR
99-232/256
0.2691
0.009
Seven-year note US7YT=RR
100-68/256
0.461
0.011
10-year note US10YT=RR
99-128/256
0.6773
0.013
20-year bond US20YT=RR
98-140/256
1.2074
0.009
30-year bond US30YT=RR
98-188/256
1.4271
0.012
DOLLAR SWAP SPREADS
Last (bps)
Net Change (bps)
U.S. 2-year dollar swap spread
8.25
0.25
U.S. 3-year dollar swap spread
7.75
0.50
U.S. 5-year dollar swap spread
6.25
0.25
U.S. 10-year dollar swap spread
0.75
0.00
U.S. 30-year dollar swap spread
-36.00
0.25
(Reporting by Chuck Mikolajczak; editing by Jonathan Oatis and Bernadette Baum)
((charles.mikolajczak@tr.com; @ChuckMik; Reuters Messaging: charles.mikolajczak.thomsonreuters.com@reuters.net))
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