TREASURIES-U.S. yields rise ahead of data, in wake of Amazon corporate supply

BY Reuters | ECONOMIC | 11/29/22 10:45 AM EST
       By Gertrude Chavez-Dreyfuss
       NEW YORK, Nov 29 (Reuters) - U.S. Treasury yields rose
in choppy trading on Tuesday, as investors braced for a slew of
data starting on Wednesday, which could reinforce expectations
for a slower pace of Federal Reserve rate increases and ahead of
a highly-anticipated corporate bond deal from Amazon (AMZN).
    Investors this week are awaiting U.S. data on gross domestic
product for the third quarter, Chicago manufacturing numbers,
factory activity based on the Institute for Supply Management,
as well as non-farm payrolls for November.
    "It's going to be a busy second half of the week with all
the data points we're expecting. But the main focus will be on
inflation and jobs," said Subadra Rajappa, head of U.S. rates
strategy, at Societe Generale in New York.
    Fed speakers this week are also expected to stick to the
script: slower rate hikes for longer. Richmond Federal Reserve
Bank President Thomas Barkin on Monday said he supports moving
to smaller interest-rate hikes in the central bank's fight to
bring down too-high inflation.
    Fed funds futures have priced in a 63.5% chance of a 50
basis-point hike at a policy meeting this month, and an 88%
chance of another such rate hike in February.
    "It's really a question of how they will change the dots at
the meeting for the upcoming year," Rajappa said, referring to
the Fed's interest rate projections.
    Investors also sold Treasuries as they anticipate details
about Amazon's (AMZN) multi-tranche corporate bond deal.
    The deal features two-year, three-year, five-year,
seven-year, and 10-year notes. The initial price talk on the
maturities is U.S. Treasuries plus 45 basis points (bps, 55 bps,
85 bps, 100 bps, and 115 bps, respectively.
    Wall Street dealers typically looked to lock in borrowing
costs for corporate bonds they are underwriting. As part of that
process, a dealer sells Treasuries as a hedge to lock in the
borrowing cost on the bond issue before the deal is completed.
Once the bond is sold, the dealer buys Treasuries to exit the
"rate lock."
    "We are the low end of the range yields. When you see
corporate supply as a factor, we tend to see a little sell-off,"
Rajappa said.
    In late morning trading, the yield on 10-year Treasury notes
 was up 2.9 bps at 3.731%. U.S. 10-year yields rose
as well after data showed that consumers' 12-month inflation
expectations increased to 7.2% from 6.9% last month.
    The U.S. consumer confidence index, however, fell to 100.2
this month from 102.2 in October.
        The yield on the 30-year Treasury bond was
    up 2.7 b
    ps at


    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes was at -74.6 bps. An inversion of this curve
typically precedes recession.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 0.2 bps at
          November 29 Tuesday 10:27AM New York / 1527 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             4.28         4.3874    -0.015
 Six-month bills               4.5575       4.7298    -0.005
 Two-year note                 100-20/256   4.4587    -0.012
 Three-year note               100-190/256  4.2298    0.000
 Five-year note                99-224/256   3.9028    0.011
 Seven-year note               100-72/256   3.8288    0.018
 10-year note                  103-84/256   3.7218    0.020
 20-year bond                  100-32/256   3.9907    0.016
 30-year bond                  104-16/256   3.7724    0.023

                               Last (bps)   Net
 U.S. 2-year dollar swap        31.50         0.00
 U.S. 3-year dollar swap        12.00        -1.00
 U.S. 5-year dollar swap         4.50        -1.00
 U.S. 10-year dollar swap       -3.75        -0.50
 U.S. 30-year dollar swap      -44.75         0.00

 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)

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