TREASURIES-U.S. Treasury prices rise modestly in low liquidity trading session

BY Reuters | TREASURY | 11/25/22 02:38 PM EST
    (Recasts, adds quote, updates prices)
    By Davide Barbuscia
       NEW YORK, Nov 25 (Reuters) - U.S. Treasury prices rose
marginally on Friday amid low liquidity after falling early in
the day in reaction to a sell-off in German bonds.
    Treasury yields, which move inversely to prices, had fallen
on Wednesday after the U.S. Federal Reserve's November meeting
minutes showed a majority of policymakers agreed it would likely
soon be appropriate to slow the pace of interest rate hikes as
the central bank keeps fighting decades-high inflation.
    But on Thursday, a holiday in the United States, European
Central Bank board member Isabel Schnabel pushed back against
calls from many of her colleagues for smaller rate increases by
the ECB, saying this could hamper efforts to bring down
inflation.
    German bonds sold off on Friday, with German 10-year bond
yields, seen as a benchmark for the EU currency
bloc, rising about 12 basis points.
    This spilled over on a global basis, said Matthew Miskin,
co-chief investment strategist at John Hancock Investment
Management. "Europe continues to have a huge influence on the
U.S. Treasury bond market," he said.
    U.S. Treasury yields climbed in early trade on Friday but
ended up lower, with benchmark 10-year yields down
by about two basis points to 3.683%, the lowest since early
October, and two-year note yields down by nearly
three bps to 4.454%.
    "It's been a very choppy day in the market so I'm taking a
lot of what's happening with a pinch of salt," said Craig Erlam,
senior market analyst at OANDA, adding low liquidity due to the
U.S. Thanksgiving holiday contributed to extra volatility.
    Meanwhile, recession concerns continued to weigh on markets.
    Wednesday's post-Fed U.S. bond market moves had seen yields
on 10-year notes drop to a huge 79 basis-point deficit relative
to two-year yields, a curve inversion that had not been seen
since the dot-com bust of 2000.
    On Friday, the curve that compares two-year and 10-year
yields - seen by many as a harbinger of an
upcoming economic contraction when inverted - remained deeply in
negative territory, though slightly steeper at -78 basis points.
    Releases of jobs data and the personal consumption
expenditures price index next week may give investors some clues
on the direction of inflation and monetary policy.
    Fed Chair Jerome Powell is also scheduled to speak about the
economic outlook and the labor market at an event on Wednesday.
  November 25 Friday 2:00PM New York / 1900 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             4.19         4.2916    -0.022
 Six-month bills               4.535        4.7035    0.003
 Two-year note                 100-22/256   4.4546    -0.028
 Three-year note               100-206/256  4.2078    -0.029
 Five-year note                100-14/256   3.8629    -0.035
 Seven-year note               100-144/256  3.7828    -0.039
 10-year note                  103-168/256  3.6831    -0.026
 20-year bond                  100-116/256  3.9668    -0.010
 30-year bond                  104-160/256  3.7419    0.000

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        33.50         2.25
 spread
 U.S. 3-year dollar swap        15.50         2.25
 spread
 U.S. 5-year dollar swap         6.25        -0.25
 spread
 U.S. 10-year dollar swap       -2.75         0.50
 spread
 U.S. 30-year dollar swap      -44.50         0.00
 spread

 (Reporting by Davide Barbuscia; Editing by David Holmes and
Cynthia Osterman)

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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