TREASURIES-US yields climb as markets in consolidation mode ahead of Fed speakers

BY Reuters | ECONOMIC | 06/17/24 11:53 AM EDT

By Gertrude Chavez-Dreyfuss

NEW YORK, June 17 (Reuters) - U.S. Treasury yields rose on Monday after falling sharply last week, as investors consolidated positions ahead of a slew of Federal Reserve speakers over the next few days who could further clarify the timing of the first interest rate cut this year.

U.S. two-year to 30-year yields advanced after declining for four straight days.

Data showing the New York Fed's Empire State Current Business Conditions index slipped less than expected to minus 6.0, from minus 15.6 the previous month helped extend the rise in yields.

"The Empire State helped a little bit, but it's more than that," said Stan Shipley, managing director and fixed income strategist at Evercore ISI in New York. "Yields came down a lot last week and so some people are taking profits here."

In late morning trading, the benchmark 10-year yield rose 7.4 basis points (bps) to 4.286%. Last Friday, it posted its biggest drop for the year after weaker-than-expected economic data, led by lower import prices.

U.S. 30-year yields climbed 7.2 bps to 4.422%.

On the front end of the curve, the U.S. two-year yield was up 6.3 bps at 4.748%.

The U.S. yield curve, meanwhile, reduced its inversion on Monday. The spread between U.S. two- and 10-year yields, widely viewed as a predictor of economic recessions, was at minus 47 bps, compared with minus 48.6 bps late on Friday, when the curve hit the most inverted since mid-March.

Analysts also said Treasury supply was likely a factor on Monday, with $13 billion in U.S. 20-year bonds and $21 billion in five-year Treasury Inflation Protected Securities (TIPS).

Fed officials will also be a focus this week, with New York Fed President John Williams, Philadelphia Fed's Patrick Harker and Fed Board Governor Lisa Cook all speaking on Monday.

Bond investors will also looking at May U.S. retail sales data on Tuesday, with industrial production, housing starts and S&P flash PMI data among other key releases due later in the week.

Fed funds futures have priced in a more than 60% chance of easing in September, according to LSEG calculations, factoring about two rate cuts for the year. (Reporting by Gertrude Chavez-Dreyfuss Editing by Nick Zieminski)

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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