TREASURIES-Yields tick higher as Fed hike, jobs report loom in week ahead

BY Reuters | ECONOMIC | 01/30/23 01:54 PM EST
    (Updates through midafternoon trading, changes headline, adds
quote, adds paragraph on auction)
    By David Randall
       NEW YORK, Jan 30 (Reuters) - U.S. Treasury yields edged
higher on Monday at the start of a busy week of economic data
and a widely anticipated interest rate hike by the Federal
    Investors have priced in a near-certainty that the Fed would
raise benchmark rates by 25 basis points at the end of its
meeting on Wednesday, the smallest increase since the central
bank began its rate-hike cycle 10 months ago.
    Economic data scheduled to be released this week, which
includes readings on consumer confidence, construction spending,
and unemployment, are expected to factor into whether the Fed
will conclude its rate hikes in March.
    "We anticipate the price action itself will be the most
relevant takeaway from the session as investors seek to
setup for this week's array of fundamental and policy
developments," said Ian Lyngen, head of U.S. Rates Strategy at
BMO Capital Markets.
        The yield on 10-year Treasury notes was up
3.5 basis points to 3.553%, bringing it close to its highest
level since Jan. 11.
    The yield on the 30-year Treasury bond was up
2.8 basis points to 3.662%.
        Rising concerns about the possibility of a default if
Congress does not raise the debt ceiling helped propel greater
demand for 6-month bills than for 3-month bills in separate
auctions held Monday, said Thomas Simons, money market economist
at Jefferies LLC.

        "It is possible that the buyside is steering clear of
the 3-month because of an expected paydown in bills that will be
ongoing when this bill matures," he said.

        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 -70.6 basis points.

        The two-year U.S. Treasury yield, which
typically moves in step with interest rate expectations, was up
5 basis points at 4.257%.

          January 30 Monday 1:21PM New York / 1821 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             4.5525       4.6665    -0.010
 Six-month bills               4.63         4.8037    -0.035
 Two-year note                 99-193/256   4.2547    0.048
 Three-year note               99-194/256   3.9621    0.054
 Five-year note                99-48/256    3.6794    0.058
 Seven-year note               99-60/256    3.6248    0.046
 10-year note                  104-176/256  3.5532    0.035
 20-year bond                  102-224/256  3.7918    0.027
 30-year bond                  106-24/256   3.662     0.028

                               Last (bps)   Net
 U.S. 2-year dollar swap        27.75        -0.25
 U.S. 3-year dollar swap        14.75         0.50
 U.S. 5-year dollar swap         5.75        -0.25
 U.S. 10-year dollar swap       -2.00         0.25
 U.S. 30-year dollar swap      -37.50         0.00

 (Reporting by David Randall; Editing by Arun Koyyur and Andrea

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.