TREASURIES-U.S. yields dip slightly at start of holiday-shortened week

BY Reuters | TREASURY | 11/21/22 09:31 AM EST
       By David Randall
       NEW YORK, Nov 21 (Reuters) - Longer duration Treasury
yields dipped slightly at the start of a holiday-shortened week
on Monday, following data that suggested the U.S. economy was
    The Chicago Fed National Activity Index fell 0.05 in
October, slightly below its expected reading of 0.0, and down
from its 0.17 gain in September.
    Investors are closely watching any sign that the U.S.
economy is slowing as a clue for how long the Federal Reserve
will continue its aggressive pace of interest rate hikes as it
attempts to bring inflation down from near 40-year highs. The
central bank is widely expected to raise interest rates by
another 50 basis points in December.
    The Treasury market will likely remain volatile over the
remaining weeks as the year as seasonal liquidity dries up, said
Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
    "We're anticipating choppy price action characterized by
disproportionately large moves in US rates based on flows and
developments that in more typical conditions wouldn't warrant a
response," he said.
    The bond market will be closed Thursday for the Thanksgiving
holiday and will close early on Friday.
        The yield on 10-year Treasury notes was down
1.3 basis points to 3.805%.
        The yield on the 30-year Treasury bond was
down 3 basis points to 3.897%.
        A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at -70.9 basis points.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 0.2 basis
points at 4.512%.
        November 21 Monday 9:14AM New York / 1414 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             4.14         4.2394    -0.011
 Six-month bills               4.475        4.6392    0.002
 Two-year note                 99-191/256   4.5118    0.002
 Three-year note               100-160/256  4.2741    -0.006
 Five-year note                100-160/256  3.9839    -0.014
 Seven-year note               100-144/256  3.9063    -0.016
 10-year note                  102-168/256  3.8026    -0.015
 20-year bond                  98-96/256    4.1201    -0.027
 30-year bond                  101-216/256  3.8952    -0.032

                               Last (bps)   Net
 U.S. 2-year dollar swap        31.25        -0.75
 U.S. 3-year dollar swap        15.25        -0.25
 U.S. 5-year dollar swap         6.00         0.50
 U.S. 10-year dollar swap       -1.25         0.75
 U.S. 30-year dollar swap      -43.25         0.50

 (Reporting by David Randall
Editing by Bernadette Baum)

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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