TREASURIES-Yields fall on growth fears before Powell testimony

BY Reuters | ECONOMIC | 06/22/22 09:28 AM EDT
       By Karen Brettell
    NEW YORK, June 22 (Reuters) - U.S. Treasury yields fell to
almost two-week lows
     on Wednesday as commodity prices softened and as fears that
the Federal Reserve will cause a recession by tightening
monetary policy boosted demand for the U.S. bonds before Federal
Reserve Chairman Jerome Powell is due to testify before
Congress.
    Oil prices tumbled on Wednesday on news of a plan by U.S.
President Joe Biden to cut fuel costs for drivers and as
recession fears dented demand and weighed on stocks.

    "The overnight session featured a pretty big drubbing in
energy, commodities prices and that's putting a little bit of a
deflationary bid into the curve," said Guy LeBas, chief fixed
income strategist at Janney Montgomery Scott in Philadelphia,"
adding that "fears about economic growth have really gotten to
take center stage away from fears of inflation."
    Investors are concerned that the U.S. central bank will dent
growth as it aggressively raises interest rates to tackle
soaring price pressures.
    Powell is expected to maintain his hawkish stance towards
further interest rate hikes on Wednesday, following the U.S.
central bank's 75 basis points rate increase last week, the
biggest since 1994.
    Economists polled by Reuters expect the Fed to hike by
another 75 basis points in July, followed by a
half-percentage-point rise in September, and that it would not
scale back to quarter-percentage-point moves until November at
the earliest.
    Two-year Treasury yields fell to 3.094%. They have fallen
from 3.456% on June 14, which was the highest since November
2007.
    Benchmark 10-year yields were at 3.162%, after reaching
3.498% on June 14, the highest since April 2011.
    The closely watched yield curve between two-year and 10-year
notes was at 7 basis points, after inverting
early last week. 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 22 Wednesday 9:10AM New York / 1310 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.6          1.6288    -0.059
 Six-month bills               2.38         2.4424    -0.019
 Two-year note                 98-228/256   3.0939    -0.104
 Three-year note               99-2/256     3.2269    -0.128
 Five-year note                97-56/256    3.2388    -0.140
 Seven-year note               96-242/256   3.2451    -0.148
 10-year note                  97-148/256   3.1618    -0.143
 20-year bond                  96-116/256   3.4988    -0.142
 30-year bond                  92-196/256   3.2553    -0.135

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        39.50        -0.50
 spread
 U.S. 3-year dollar swap        17.00         0.25
 spread
 U.S. 5-year dollar swap         4.00         0.00
 spread
 U.S. 10-year dollar swap        6.75         0.25
 spread
 U.S. 30-year dollar swap      -27.25         0.25
 spread



 (Reporting by Karen Brettell;
Editing by 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.

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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