TREASURIES-Yields edge higher as investors expect Fed to act on inflation

BY Reuters | ECONOMIC | 11/23/21 09:50 AM EST
       By David Randall
    NEW YORK, Nov 23 (Reuters) - U.S. Treasury yields edged
higher in choppy trading Tuesday as investors prepared for the
Federal Reserve to become more aggressive in fighting inflation
after President Joe Biden nominated Jerome Powell for a second
term helming the Federal Reserve.
    The yield on 10-year Treasury notes was up 1.8
basis points to 1.643%. The yield on the 30-year Treasury bond
 was up 1.3 basis points to 1.991%.
    The move higher in yields was not uniform, however, with the
two-year U.S. Treasury yield, which typically moves
in step with interest rate expectations, down 1.4 basis points
at 0.616% after hitting its highest level since March 2020 on
    "The pressure on the Fed to react to the recent acceleration
in inflation is building not just from the so-called inflation
vigilantes and the hawks on the Committee, but also from the
progressive academics and from their peers at other central
banks," said Steven Ricchiuto, U.S. Chief Economist at Mizuho
    The Treasury Department will auction $59 billion in 7-yaer
notes later this afternoon, which could spur investor interest
after recent declines, said Ben Jeffery, a strategist at BMO
Capital Markets.
    "The cheapening over the past several weeks that has
extended this morning adds some outright appeal to 7s, and given
their relative performance on the curve there is also a case to
be made we could see some dip buying," he said.
    The yield curve, meanwhile, slightly steepened, with spreads
between 5- and 30-year Treasuries rising Tuesday after touching
their to their lowest levels since March 2020 the day before.

    November 23 Tuesday 9:33AM New York / 1433 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.05         0.0507    -0.002
 Six-month bills               0.075        0.0761    0.000
 Two-year note                 99-195/256   0.6201    -0.010
 Three-year note               99-112/256   0.9422    0.003
 Five-year note                99-144/256   1.3408    0.017
 Seven-year note               98-176/256   1.5755    0.026
 10-year note                  97-128/256   1.6478    0.023
 20-year bond                  99-76/256    2.0431    0.018
 30-year bond                  97-84/256    1.9938    0.016

                               Last (bps)   Net
 U.S. 2-year dollar swap        23.75        -2.75
 U.S. 3-year dollar swap        23.25         1.75
 U.S. 5-year dollar swap        10.25        -0.50
 U.S. 10-year dollar swap        6.00         0.50
 U.S. 30-year dollar swap      -16.75         0.75

 (Reporting by David Randall, Editing by Nick Zieminski)

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.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.