TREASURIES-Yields rise as strong retail sales calm recession fear

BY Reuters | ECONOMIC | 05/17/22 11:35 AM EDT
    (Corrects 10-year yield's historical comparison in fourth
paragraph)
    By Karen Brettell
    NEW YORK, May 17 (Reuters) - U.S. Treasury yields rose on
Tuesday after data showed that retail sales increased strongly
in April, reducing fears that the American economy is likely to
fall into recession as the Federal Reserve aggressively hikes
interest rates.
    Retail sales rose 0.9% last month. Data for March was
revised higher to show sales advancing 1.4% instead of 0.5%, as
previously reported. April's increase in retail sales, which
reflected both strong demand and higher prices, was in line with
economists' expectations.
    The data "showed no sign that the consumer is cracking under
the weight of inflation, higher interest rates or the lack of
stimulus payments," Jefferies economists Aneta Markowska and
Thomas Simons said in a report.
    Benchmark 10-year Treasury yields hit a 3-1/2-year high of
3.203% on May 9 as investors adjusted for the prospect of the
Fed continuing to hike rates at a fast pace as it tackles
soaring inflation.
    But they have dipped in the past week as investors also
worry that the rapid monetary tightening may strangle growth and
send the economy into a downturn.
    The 10-year yields were last at 2.955%, up 7
basis points on the day.
    The yield curve between two-year and 10-year yields
 flattened two basis points to 29 basis points.

    May 17 Tuesday 11:20AM New York / 1520 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.0475       1.0649    -0.002
 Six-month bills               1.5225       1.5556    0.029
 Two-year note                 99-177/256   2.663     0.095
 Three-year note               99-186/256   2.8459    0.099
 Five-year note                99-54/256    2.9222    0.102
 Seven-year note               99-100/256   2.9725    0.091
 10-year note                  99-80/256    2.9549    0.076
 20-year bond                  85-220/256   3.3604    0.054
 30-year bond                  94-184/256   3.1484    0.064

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        27.25        -0.75
 spread
 U.S. 3-year dollar swap        12.00        -0.25
 spread
 U.S. 5-year dollar swap         3.00        -1.00
 spread
 U.S. 10-year dollar swap        6.00        -0.50
 spread
 U.S. 30-year dollar swap      -26.50        -1.00
 spread


 (Reporting by Karen Brettell; editing by Jonathan Oatis)

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.

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