Re: THE DAILY NEWS
Posted: Thu May 25, 2023 1:40 p
REUTERS
"TREASURIES-Yields rise on strong U.S. data, debt ceiling talks push short-term bills lower"
By Herbert Lash
MAY 25, 2023
NEW YORK, May 25 (Reuters) - Treasury yields surged on Thursday on signs of persistent strength in the U.S. labor market, but gains on short-term bills were pared when top congressional Republican Kevin McCarthy said some progress had been made in talks to raise the debt ceiling.
President Joe Biden later said he and McCarthy had "several productive conversations" on the debt ceiling.
The remarks pushed yields lower on debt maturing on June 1, the date the Treasury has stated when it may start to run out of money.
The six-month Treasury bill due June 1 fell sharply from above 7% to below 6% after McCarthy, the House of Representatives speaker, said negotiators had worked well past midnight, though he acknowledged "outstanding issues" remained.
Ratings agency Fitch late Wednesday put the United States on credit watch for a possible downgrade, while DBRS Morningstar on Thursday placed U.S. credit ratings under review with "negative implications."
Short-term bills have been hammered because of a risk that the debt might not get paid, said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco.
"If there were real concerns of a default nobody would want these things," she said.
"The U.S. isn't dropping off a cliff."
"The number of positives underpinning Treasuries are more than the negatives and they're better than most other forms of debt."
The Treasury sold $35 billion in seven-year notes at a high yield of 3.827% in strong bidding, or more than half a basis point lower at the auction's deadline.
Safe-haven demand helped drive bidding, Rupert said.
"The debt ceiling isn't really a big negative for the coupon auctions," she said.
Federal funds futures rose to a 50.5% probability that the Fed raises rates at the end of a two-day policy on June 14, a sharp rise from the settlement price of 36.4% on Wednesday, according to CME Group's FedWatch tool.
The number of Americans filing new claims for unemployment benefits rose moderately last week, and the prior week's data was revised sharply lower, suggesting persistent labor market strength, the Labor Department said.
Low claims align with recent data on retail sales, factory production and business activity that have suggested the economy regained speed at the start of the second quarter.
The still strong economy could keep inflation "sticky" and harder to lower to the Fed's 2% target.
The Commerce Department on Friday will publish the personal consumption expenditures (PCE) price index for April.
Core PCE is expected to have risen 0.3% from March, and 4.6% year over year, a Reuters poll of analysts shows.
The two-year Treasury yield, which often moves in step with interest rate expectations, rose 16.1 basis points at 4.504%.
On benchmark 10-year notes, the yield rose 9.2 basis points to 3.812%.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as a recession harbinger when the curve is inverted, was at -69.4 basis points.
The 10-year TIPS breakeven rate was last at 2.259%, indicating the market sees inflation averaging about 2.3% a year for the next decade.
The U.S. dollar 5 years forward inflation-linked swap, seen by some as a better gauge of inflation expectations due to possible distortions caused by the Fed's quantitative easing, was last at 2.581%.
(Reporting by Tom Westbrook; Editing by Muralikumar Anantharaman, Will Dunham and Robert Birsel)
https://www.reuters.com/article/usa-bon ... SL1N37M2H7
"TREASURIES-Yields rise on strong U.S. data, debt ceiling talks push short-term bills lower"
By Herbert Lash
MAY 25, 2023
NEW YORK, May 25 (Reuters) - Treasury yields surged on Thursday on signs of persistent strength in the U.S. labor market, but gains on short-term bills were pared when top congressional Republican Kevin McCarthy said some progress had been made in talks to raise the debt ceiling.
President Joe Biden later said he and McCarthy had "several productive conversations" on the debt ceiling.
The remarks pushed yields lower on debt maturing on June 1, the date the Treasury has stated when it may start to run out of money.
The six-month Treasury bill due June 1 fell sharply from above 7% to below 6% after McCarthy, the House of Representatives speaker, said negotiators had worked well past midnight, though he acknowledged "outstanding issues" remained.
Ratings agency Fitch late Wednesday put the United States on credit watch for a possible downgrade, while DBRS Morningstar on Thursday placed U.S. credit ratings under review with "negative implications."
Short-term bills have been hammered because of a risk that the debt might not get paid, said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco.
"If there were real concerns of a default nobody would want these things," she said.
"The U.S. isn't dropping off a cliff."
"The number of positives underpinning Treasuries are more than the negatives and they're better than most other forms of debt."
The Treasury sold $35 billion in seven-year notes at a high yield of 3.827% in strong bidding, or more than half a basis point lower at the auction's deadline.
Safe-haven demand helped drive bidding, Rupert said.
"The debt ceiling isn't really a big negative for the coupon auctions," she said.
Federal funds futures rose to a 50.5% probability that the Fed raises rates at the end of a two-day policy on June 14, a sharp rise from the settlement price of 36.4% on Wednesday, according to CME Group's FedWatch tool.
The number of Americans filing new claims for unemployment benefits rose moderately last week, and the prior week's data was revised sharply lower, suggesting persistent labor market strength, the Labor Department said.
Low claims align with recent data on retail sales, factory production and business activity that have suggested the economy regained speed at the start of the second quarter.
The still strong economy could keep inflation "sticky" and harder to lower to the Fed's 2% target.
The Commerce Department on Friday will publish the personal consumption expenditures (PCE) price index for April.
Core PCE is expected to have risen 0.3% from March, and 4.6% year over year, a Reuters poll of analysts shows.
The two-year Treasury yield, which often moves in step with interest rate expectations, rose 16.1 basis points at 4.504%.
On benchmark 10-year notes, the yield rose 9.2 basis points to 3.812%.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as a recession harbinger when the curve is inverted, was at -69.4 basis points.
The 10-year TIPS breakeven rate was last at 2.259%, indicating the market sees inflation averaging about 2.3% a year for the next decade.
The U.S. dollar 5 years forward inflation-linked swap, seen by some as a better gauge of inflation expectations due to possible distortions caused by the Fed's quantitative easing, was last at 2.581%.
(Reporting by Tom Westbrook; Editing by Muralikumar Anantharaman, Will Dunham and Robert Birsel)
https://www.reuters.com/article/usa-bon ... SL1N37M2H7