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NEW YORK — Yields on U.S. Treasuries continued to rise
Thursday after Federal Reserve Chairman Jerome Powell reiterated
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that the US central bank’s priority is to fight inflation,
ahead of next week’s highly anticipated consumer price data.
Powell said the Fed is “strongly committed” to fighting back
inflation, but there is hope that we can do without it
the “very high social costs” involved in previous control campaigns
rising prices.
“It was in line with his Jackson Hole statement — a necessity
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raise rates more to reduce inflation. That’s really it
the essence of the message was,” said Gennadz Goldberg, an
interest rate strategist at TD Securities in New York.
Chicago Fed President Charles Evans also said Thursday
that reducing high inflation is “task one” and to do so
The Fed may “very well” raise interest rates by another 75 basis points
points this month.
Fed officials have been going into blackout periods before
their meeting on September 20-21, when the Fed is expected to raise
rates by another 75 basis points, increasing the federal funds rate
to 3.0% to 3.25%.
Data on consumer price inflation for August will be released on Tuesday
come after the blackout period begins.
Data on Thursday showed employment remained strong. The
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the number of Americans filing new claims for unemployment benefits
fell last week to a three-month low.
Concerns that central banks will remain dovish
inflation will remain consistently high if energy prices rise
the approach to winter increased the yield of government bonds
worldwide in recent weeks.
The European Central Bank raised the key on Thursday
interest rates by an unprecedented 75 basis points and gave the signal
further hikes, prioritizing the fight against inflation, even if
the bloc’s economy is headed for a likely winter recession.
Yields fell earlier on Thursday as oil prices fell
China has extended lockdown measures to combat COVID-19
increased concern about the slowdown in economic activity spread
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around the world will hit the demand for fuel.
The rise of the US currency against the Japanese yen, the euro and
other currencies also added to the demand for US bonds, as
investors are looking for a place to put their cash in dollars
assets.
The yield on 10-year notes rose by three basis points
points to 3.292%. They rose from a four-month low
2.516% as of August 2, but held below an 11-year high
3.498% reached on June 14.
Two-year bond yields rose by four basis points
3.491%, below the 3.551% level reached last Thursday
the highest since November 2007.
The yield curve between two-year and 10-year notes
remained inverted at the level of minus 20 basis points, an
an indicator that a recession is likely in the next one or two
years. However, the inversion is less severe than minus 56
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the level of basis points reached on August 10.
Inflationary expectations also fell. Breakeven rates on
five-year Treasury Inflation-Protected Securities (TIPS)
hit a two-month low of 2.50%, indicating
expectations of 2.50% inflation per year for the next five
years.
Thursday, September 8, 15:00 New York / 19:00 GMT
Price Current Net
Profitability % change
(bps)
Three-month bills 2.965 3.0286 -0.018
Six Month Bills 3.3625 3.4678 0.023
Two-year banknote 99-139/256 3.4911 0.044
Three-year banknote 98-216/256 3.5431 0.049
Five-year note 98-196/256 3.3966 0.037
Seven-year note 98-112/256 3.3782 0.033
10-year note 95-112/256 3.2921 0.027
20-year bond 95-140/256 3.6925 0.034
30-year bond 91-200/256 3.442 0.037
DOLLAR SPREADS SWOP
Latest network (bps).
A change
(bps)
2-year dollar swap 36.00 -1.25
distribution
3-year dollar swap 11.00 -2.00
distribution
5-year dollar swap 5.75 -0.75
distribution
10-year dollar swap 7.00 -0.50
distribution
30-year dollar swap -32.25 0.00
distribution
(Reporting by Karen Brettel; Editing by Jonathan Oatis and
Nick Zeminski)
