TREASURIES-Yields stable ahead of Powell remarks

BY Reuters | TREASURY | 02/23/21 09:25 AM EST
       By Ross Kerber
    Feb 23 (Reuters) - U.S. Treasury yields were little changed
on Tuesday as investors awaited comments from Federal Reserve
Chairman Jerome Powell in Washington due later in the morning.
    The benchmark 10-year yield was up less than a
basis point at 1.3704% in morning trading. Earlier in the week
it had reached 1.394%, the highest since a year ago, on
expectations of faster U.S. growth.
    Powell was due to give lawmakers an update on an economy
still reeling from the pandemic but perhaps poised to take off
later this year if the U.S. vaccination program hits its
    For bond investors the question is whether the Fed will
continue its dovish stance on inflation or send different
signals as economic growth picks up and unemployment drops.
    Expectations of an uptick in prices have already boosted
yields on longer-term U.S. debt significantly since the summer,
and the 30-year bond's yield touched as high as
2.34% on Tuesday, the highest since early January 2020.
    "Short rates haven't moved but the long end of the curve has
come up in anticipation of higher inflation," said Eric
Jussaume, director of fixed income for Cambridge Trust.
    Futures tracking the Nasdaq index pointed to a more than 1%
drop at the open on Tuesday as investors sold off high-flying
technology stocks on valuation concerns ahead Powell's
    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 an indicator of economic
expectations, was at 126 basis points, about a basis point
higher than Monday's close.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down less
than a basis point at 0.1129% in morning trading.

  February 23 Tuesday 9:03AM New York / 1403 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.0325       0.033     0.000
 Six-month bills               0.05         0.0507    0.003
 Two-year note                 100-6/256    0.1129    -0.002
 Three-year note               99-182/256   0.2225    -0.002
 Five-year note                98-244/256   0.5906    -0.006
 Seven-year note               98-92/256    0.9954    0.000
 10-year note                  97-184/256   1.3704    0.001
 20-year bond                  97-112/256   2.0318    0.013
 30-year bond                  92-244/256   2.1972    0.017

                               Last (bps)   Net
 U.S. 2-year dollar swap         9.50         0.50
 U.S. 3-year dollar swap        10.50        -0.25
 U.S. 5-year dollar swap        13.00         0.00
 U.S. 10-year dollar swap        7.50        -0.75
 U.S. 30-year dollar swap      -24.75        -1.25

 (Reporting by Ross Kerber in Boston;
Editing by Mark Heinrich)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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