Saturday, October 23

Most yields lower on fourth-quarter repositioning


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Traders sent longer-term US Treasury

yields lower on Friday as they repositioned for the year’s

fourth quarter, although Washington’s budget battles sent up

yields on soon-to-mature debt.

The benchmark 10-year yield was down 5 basis

points at 1.4771%. It had reached as high as 1.51% overnight but

settled despite positive economic data showing US consumer

spending increased more than expected in August.

“We’ve had a bit of a pullback, I think it’s more technical

than fundamental in nature,” said Kevin Flanagan, head of fixed

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income strategy at WisdomTree Asset Management.

Investors were buying Treasuries after a big sell-off that

began Sept. 23 when the US Federal Reserve and European

central bankers moved toward higher interest rates, he

said.

Flanagan and others described the high-stakes budget brawl

in Washington as having little effect on the government debt

market.

The Democratic-controlled US Congress struggled on Friday

to advance President Joe Biden’s agenda, with House progressives

vowing to block a $1 trillion infrastructure bill without a deal

on a larger social spending and climate change bill.

An exception was the market for bills with approaching

maturities as Treasury Secretary Janet Yellen has estimated a

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historic US debt default could occur around Oct. 18 if

Congress fails to act.

The yield on a US Treasury bill maturing on Oct. 19

for instance reached as high as 0.15% on Friday and

was last at 0.1014%, still more than any prior day since the

bill was issued in June.

Fitch Ratings said on Friday the United States’ AAA

sovereign credit rating could be pressured if federal lawmakers

fail to address the debt ceiling in a timely manner.

A closely watched part of the US Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, seen as an indicator of economic

expectations, was at 121 basis points, about the same as

Thursday’s close.

The two-year US Treasury yield, which typically

moves in step with interest rate expectations, was down 2.3

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basis points at 0.2657%.

October 1 Friday 2:15PM New York / 1815 GMT

Price Current Net

Yield% Change

(bps)

Three-month bills 0.0375 0.038 0.000

Six-month bills 0.05 0.0507 0.000

Two-year note 99-248/256 0.2657 -0.023

Three-year note 99-168/256 0.4926 -0.031

Five-year note 99-180/256 0.936 -0.059

Seven-year note 99-230/256 1.2652 -0.060

10-year note 97-236/256 1.4771 -0.050

20-year bond 95-252/256 1.9958 -0.038

30-year bond 98-188/256 2.0569 -0.034

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

US 2-year dollar swap 10.50 0.75

spread

US 3-year dollar swap 14.25 0.75

spread

US 5-year dollar swap 8.75 0.25

spread

US 10-year dollar swap 1.50 -0.50

spread

US 30-year dollar swap -26.50 -1.00

spread

(Reporting by Ross Kerber in Boston; Editing by Nick Macfie,

Kirsten Donovan)

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