TREASURIES-Yields hover near highs in choppy trading after FOMC minutes

BY Reuters | ECONOMIC | 11/24/21 02:56 PM EST
    (Updates with FOMC minute release, updates trading throughout)
    By David Randall
    NEW YORK, Nov 24 (Reuters) - U.S. Treasury yields hovered
near highs for the year in choppy trading after data released
Wednesday suggested the job market and consumer spending
continue to improve.
    The number of Americans filing new claims for unemployment
benefits fell to the lowest since 1969 last week, the Labor
Department said. At the same time, personal consumption rose
1.7% - slightly more than the estimated 1.6% - in the third
    The yield on 10-year Treasury notes was down 1.2
basis points to 1.653% after rising as much as 3 basis points
earlier in the day, near its high for the year of 1.74% reached
in March. The yield on the 30-year Treasury bond was
down 4.2 basis points to 1.981%.
    Signs of strength in the economy will likely reinforce
investors' belief that inflation will accelerate and weigh on
Treasury prices, said Ian Lyngen, head of U.S. rates strategy at
BMO Capital Markets.
    "The market has been and continues to lean bearishly
duration, which suggests that a collective shift back closer to
neutral would create a meaningful round of buying in
Treasuries," he said.
    At the Federal Reserve, some policymakers may be open to
accelerating its tapering program, minutes from its latest
policy meeting revealed.
    Fed officials agreed at the Nov. 2-3 meeting to begin
reducing its pandemic relief of $120 billion in monthly
purchases of Treasuries and mortgage-backed securities with a
timeline that would see them tapered completely by next June.

    "If we have the largest buyer of Treasuries, who is very
price insensitive, stepping out of the market we think that it
makes sense that we will see yields move higher," said Brian
Jacobsen, senior investment strategist at Allspring Global
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 3.4 basis
points at 0.642%.
    The yield curve flattened, with spreads between 5- and
30-year Treasuries tightening near their lowest levels since
March 2020.

    November 24 Wednesday 2:30PM New York / 1930 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.06         0.0608    0.010
 Six-month bills               0.0975       0.0989    0.023
 Two-year note                 99-184/256   0.6417    0.034
 Three-year note               99-96/256    0.964     0.027
 Five-year note                99-138/256   1.3456    0.012
 Seven-year note               99-116/256   1.5828    -0.004
 10-year note                  97-120/256   1.6514    -0.014
 20-year bond                  99-72/256    2.044     -0.028
 30-year bond                  97-164/256   1.9797    -0.043

                               Last (bps)   Net
 U.S. 2-year dollar swap        23.50         1.00
 U.S. 3-year dollar swap        22.75         1.50
 U.S. 5-year dollar swap        10.25         0.25
 U.S. 10-year dollar swap        5.00        -0.50
 U.S. 30-year dollar swap      -17.00         0.25

 (Reporting by David Randall;
Editing by Nick Zieminski and Chizu Nomiyama)

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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