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NEW YORK — U.S. Treasury yields were
little changed on Thursday after the benchmark 10-year note hit
a fresh six-week low, with inflation fears continuing to
dissipate as economic data and corporate announcements point to
The yield on 10-year Treasury notes rose 0.9
basis points to 2.756% after falling to 2.706% early in the
Expectations were high a few weeks ago that the Federal
Reserve would aggressively hike interest rates to tackle
inflation, but recent data has suggested a weakening economy,
said Lou Brien, market strategist at DRW Trading.
“The drift of the data lately has been on the weak side,
notably those new home sales were pretty darn bad,” he said.
New home sales plunged a more-than-expected 16.6% in April
to a seasonally adjusted annual rate of 591,000 units, the
Commerce Department said on Tuesday.
“The market has got a little too far over its skis, as far
as how the economy was going to go and how the Fed was going to
go,” Brien said.
Minutes released on Wednesday from a Fed policy meeting
three weeks ago suggest the Fed could pause hiking rates in
September after two hikes of 50 basis points each in June and
July put its policy rate close to neutral.
The market has been waiting for data at the macro level to
confirm slower economic growth, but micro data from corporations
is providing ample evidence, said Steven Ricchiuto, U.S. chief
economist at Mizuho Securities USA LLC.
“A lot of what’s happening are corporate announcements.
Apple today, don’t ignore it,” Ricchiuto said.
Apple Inc plans to keep iPhone production for 2022
roughly flat at about 220 million units, Bloomberg News
reported, as China’s COVID-19 curbs, global supply-chain issues
and cooling demand hurt smartphone makers.
“People are buying in to the view that the economy is
getting hit, and the economy getting hit is going to bring down
inflation,” Ricchiuto said.
Two-year Treasury yields, which typically move in
step with interest rate expectations, fell 0.8 basis point to
2.494%, a sharp drop from a more than three-year high of 2.844%
in early May.
The Treasury Department sold $42 billion of seven-year notes
at a high yield of 2.777%. The auction was very strong with the
high yield more than 2 basis points lower than the yield at the
bidding deadline, Brien 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 26.0 basis points.
The yield on the 30-year Treasury bond was up
1.9 basis points at 2.984%.
The breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) was last at
The 10-year TIPS breakeven rate was last at
2.649%, indicating the market sees inflation averaging about
2.6% a year for the next decade.
The U.S. dollar five years forward inflation-linked swap
, seen by some as a better gauge of inflation
expectations due to possible distortions caused by the Fed’s
quantitative easing, was last at 2.493%.
May 26 Thursday 3:49 PM New York / 1949 GMT
Price Current Net
Yield % Change
Three-month bills 1.045 1.0623 -0.011
Six-month bills 1.47 1.5016 -0.002
Two-year note 100-3/256 2.494 -0.008
Three-year note 100-80/256 2.6396 0.009
Five-year note 99-144/256 2.7192 0.003
Seven-year note 100-176/256 2.7651 0.004
10-year note 101-8/256 2.7559 0.009
20-year bond 101-24/256 3.1755 0.028
30-year bond 97-216/256 2.9843 0.019
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 30.25 2.50
U.S. 3-year dollar swap 16.00 1.00
U.S. 5-year dollar swap 4.75 1.25
U.S. 10-year dollar swap 7.00 0.50
U.S. 30-year dollar swap -22.75 0.50
(Reporting by Herbert Lash in New York
Editing by Jonathan Oatis and Matthew Lewis)
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