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TREASURIES-Yields slip as corp supply ebbs, Treasury to sell 10-year TIPS

·3 min read

By Karen Brettell NEW YORK, Nov 18 (Reuters) - U.S. Treasury yields edged lower on Thursday as new debt supply eased though liquidity was expected to deteriorate heading into next week’s Thanksgiving holiday. Yields jumped after data last week showed that U.S. consumer prices posted their biggest gain in 31 years in October, with a weak 30-year bond auction adding to the selling pressure and corporate supply early this week extending the yield increase to three-week highs on Wednesday. The selloff has now eased, however, as corporate supply ebbs and after the U.S. Treasury sold $23 billion in 20-year bonds on Wednesday to demand that wasn’t as weak as some had feared. Now that corporate supply has eased and the U.S. Treasury sold $23 billion in 20-year bonds on Wednesday to demand that wasn’t as bad as some had feared, which has helped to stem the selloff. Companies were “trying to get ahead of the typical slowdown following Thanksgiving, but that supply has begun to slow a little bit. We’ve started to stabilize on the rates front,” said Jonathan Cohn, head of rates trading strategy at Credit Suisse in New York. Benchmark 10-year notes were last at 1.599%. They have jumped from a low of 1.415% last week and are holding below five-month highs of 1.705% reached on Oct. 21. Bond moves may stay choppy, however, as the market struggles with reduced liquidity that is likely to worsen during the end of year holiday season. “There has been a pretty notably decline in market liquidity, which I think has been contributing to some of the outsized moves,” said Cohn. “The fact that we’ve already experienced some diminished liquidity suggests that this choppiness that we’ve seen can persist.” The ICE BofA MOVE Index, a measure of volatility in U.S. Treasuries, has risen to its highest level since April 2020. Investors are grappling with whether the Federal Reserve will need to raise interest rates sooner than expected as fears grow that rising inflation is becoming more entrenched. The Treasury will sell $14 billion in 10-year Treasury Inflation-Protected Securities (TIPS) on Thursday. Yields on the securities have edged higher after dipping to a record low of minus 1.243% on Nov. 10, though they remain deeply negative at minus 1.135%. Data on Thursday showed that the number of Americans filing new claims for unemployment benefits fell close to pre-pandemic levels last week as the labor market recovery has gained momentum, though a shortage of workers continues to hamper faster job gains. November 18 Thursday 9:56AM New York / 1456 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 0.000 Six-month bills 0.06 0.0609 -0.005 Two-year note 99-191/256 0.5062 0.002 Three-year note 99-176/256 0.8561 0.005 Five-year note 99-118/256 1.2376 0.000 Seven-year note 99-72/256 1.4842 -0.005 10-year note 97-240/256 1.5992 -0.005 20-year bond 99-164/256 2.022 -0.020 30-year bond 97-108/256 1.9896 -0.007 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 24.25 -0.25 spread U.S. 3-year dollar swap 19.25 -0.50 spread U.S. 5-year dollar swap 10.50 0.25 spread U.S. 10-year dollar swap 4.75 0.25 spread U.S. 30-year dollar swap -19.75 0.25 spread (Editing by Mark Heinrich)