TREASURIES-U.S. yields dip with eyes on inflation data

BY Reuters | TREASURY | 09/13/21 10:48 AM EDT
       NEW YORK, Sept 13 (Reuters) - U.S. government bond yields
dipped on Monday with markets looking ahead to consumer
inflation data on Tuesday that is expected to show a continuing
slowdown in the pace of price increases.
    Yields are seen remaining in a tight range after last week's
10- and 30-year auctions were met with strong demand.
    "It will likely take downside surprises for CPI and retail
sales to register in the bond market in the next five days,"
said Jim Vogel, head of fixed income strategy and commentary at
FHN Financial Capital Markets, in a client note.
    The core reading of the U.S. consumer price index is
expected to show a rise of 0.3% in August, down from 0.5% the
previous month and 0.9% in June.
    "The numbers are important to the run up to the fourth
quarter, but they are not pivotal by themselves. Any weakness
will be explained away by the (COVID-19) Delta wave," Vogel
    Shortages of basic materials and parts have created
bottlenecks, and price increases, across various supply chains.
    The U.S. Federal Reserve is paying close attention to price
pressures as it mulls when to begin to reduce its massive bond
holdings and how soon to begin lifting rates from near zero. It
also remains on the lookout for any signs that price pressures
may broaden.
    There are no scheduled Federal Reserve speakers this week
ahead of next week's FOMC meeting.
    The yield on 10-year Treasury notes was down 2
basis points to 1.321%.
    The yield on the 30-year Treasury bond was down
2.7 basis points to 1.907%.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 0.4
basis point at 0.213%.

      September 13 Monday 10:31 AM New York / 1431 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.0475       0.0482    0.000
 Six-month bills               0.05         0.0507    0.000
 Two-year note                 99-213/256   0.2109    -0.006
 Three-year note               99-208/256   0.438     -0.010
 Five-year note                99-198/256   0.7967    -0.019
 Seven-year note               100-44/256   1.0993    -0.021
 10-year note                  99-92/256    1.3191    -0.022
 20-year bond                  98-156/256   1.8336    -0.026
 30-year bond                  102-44/256   1.9044    -0.030

                               Last (bps)   Net
 U.S. 2-year dollar swap        10.00         0.00
 U.S. 3-year dollar swap        11.25         0.25
 U.S. 5-year dollar swap         9.50         0.00
 U.S. 10-year dollar swap        2.00        -0.75
 U.S. 30-year dollar swap      -26.00        -0.25

 (Reporting by Rodrigo Campos; Editing by Steve Orlofsky)

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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