TREASURIES-Yields close volatile week near their lows

BY Reuters | TREASURY | 06/17/22 10:13 AM EDT
       By Karen Brettell
    NEW YORK, June 17 (Reuters) - U.S. Treasury yields held at
lower levels on Friday after a volatile week that saw yields hit
more than 10-year highs on expectations of aggressive rate
hikes, and then fall on concerns about how these will impact
growth.
    The Federal Reserve is expected to continue hiking interest
rates aggressively as it faces soaring inflation, following a 75
basis points hike on Wednesday, which was the largest since
1994.
    "There's a lot of worries about the next time the Fed meets,
which is the end of July, about whether they are going to do 75
or do something slightly less, which would be 50 basis points,"
said Tom di Galoma, a managing director at Seaport Global
Holdings.
    Fed funds futures traders are pricing in a 82% probability
of a 75 basis points hike in July, and an 18% chance of a 50
basis points increase. The Fed's benchmark rate is expected to
rise to 3.75% by March, from 1.58% now.
    The impact of the rapid increase in interest rates is
expected to weigh on growth, and could tip the economy into
recession, which would likely send longer-dated Treasury yields
lower.
    "As we go through the rest of the year I think rates will be
lower than they are right now, because I think we're headed
towards a recession sooner rather than later," di Galoma said.
    Two-year Treasury yields, which are highly sensitive to
interest rate moves, were last at 3.120% and are down from
3.456% on Tuesday, which was the highest since November 2007.

    Benchmark 10-year yields were at 3.231%, after reaching
3.498% on Tuesday, the highest since April 2011.
    The closely watched yield curve between two-year and 10-year
notes was at 11 basis points, after inverting by
5 basis points on Tuesday. An inversion in this part of the
curve is seen as a reliable indicator that a recession is likely
in one to two years.

      June 17 Friday 9:41AM New York / 1341 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5625       1.5901    0.005
 Six-month bills               2.1625       2.2161    -0.008
 Two-year note                 98-215/256   3.1196    -0.038
 Three-year note               98-194/256   3.3156    -0.045
 Five-year note                96-216/256   3.3225    -0.052
 Seven-year note               96-124/256   3.321     -0.064
 10-year note                  97           3.2313    -0.074
 20-year bond                  95-232/256   3.5381    -0.077
 30-year bond                  92-60/256    3.2847    -0.076

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        44.50         0.25
 spread
 U.S. 3-year dollar swap        18.25         0.50
 spread
 U.S. 5-year dollar swap         3.75         0.50
 spread
 U.S. 10-year dollar swap        5.00         0.25
 spread
 U.S. 30-year dollar swap      -30.75         0.25
 spread




 (Reporting by Karen Brettell
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.

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