TREASURIES-U.S. yields seen in tight range, traders eye Fed meeting

BY Reuters | ECONOMIC | 09/15/21 03:45 PM EDT
    (Updates prices)
    NEW YORK, Sept 15 (Reuters) - U.S. government bond yields
ticked higher on Wednesday, in a bounce back as the 10-year
yield touched a fresh three-week low following economic data
that showed further evidence that inflation had probably peaked.
    Import prices declined for the first time in 10 months in
August, though persistent bottlenecks in the supply chain could,
however, keep inflation high. Federal Reserve Chair Jerome
Powell has maintained that high inflation is transitory.
    With no top tier economic data coming in the rest of the
week, traders are looking forward to next week's Fed meeting as
it prepares to reduce its trove of bond holdings.
    Economic data is starting to underpin the idea that high
inflation is transitory according to Jason Pride, chief
investment officer for private wealth at Glenmede.
    "It seems like the market storyline is coming around to the
Fed's storyline, which I believe is stabilizing the range of
where interest rates are priced," Pride said.
    The yield on 10-year Treasury notes was up 2.3
basis points to 1.302% after earlier touching a three-week low
of 1.26%.
    The yield on the 30-year Treasury bond was up
1.3 basis points to 1.865%.
    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 108.8 basis points.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 0.4 basis
points at 0.213%.
    The U.S. Treasury yield curve measuring the gap between
yields on 5- and 30-year Treasury notes was at
106.4 basis points, after earlier touching 103.9 bps, the
flattest in 13 months.

    September 15 Wednesday 3:29PM New York / 1929 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.04         0.0406    0.000
 Six-month bills               0.0475       0.0482    -0.003
 Two-year note                 99-212/256   0.2131    0.004
 Three-year note               99-208/256   0.438     0.008
 Five-year note                99-194/256   0.7999    0.019
 Seven-year note               100-54/256   1.0934    0.023
 10-year note                  99-132/256   1.3022    0.023
 20-year bond                  99-36/256    1.8015    0.020
 30-year bond                  103-20/256   1.8652    0.013

                               Last (bps)   Net
 U.S. 2-year dollar swap        10.50         0.50
 U.S. 3-year dollar swap        11.50         0.00
 U.S. 5-year dollar swap        10.00         0.00
 U.S. 10-year dollar swap        3.25         0.75
 U.S. 30-year dollar swap      -24.00         1.00

 (Reporting by Rodrigo Campos
Editing by Marguerita Choy)

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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