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US yields pull back in choppy trade, but the uptrend is firmly in place

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NEW YORK – US Treasury yields on

Thursday fell, as risk appetite deteriorated with stocks falling and

investors consolidating positions that have grown to 2 and 5 years

rates to two-year highs earlier in the week, as they braced

for an interest rate hike in March and at least two more by the

the end of the year.

A strong auction of US 30-year bonds on Thursday, after

a lackluster 10-year ticket sale the previous session, boosted

offers on Treasuries, pushing yields lower.

Data showing modest rise in U.S. producer prices (PPI) in


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December and an unexpected increase in weekly jobless claims had

minimal impact on treasury bills. The Federal Reserve is still

expected to tighten in two months, for the first time in

more than four years.

Fed Governor Lael Brainard became last Thursday and

most senior US central banker to report that the Fed is

are preparing to start raising interest rates in March.

“We cannot trust an apparent moderation in inflation to

the next four months, ”Jim Vogel, Senior Rate Strategist, at

FHN Financial, told the Reuters Global Markets Forum. “Data

is still too noisy to be sure of a break or less

pressure on stocks and supply.

The data showed that producer price inflation in the United States has slowed in

December, the final demand index only increased by 0.2% after


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up 1.0% in November. This is the lowest PPI gain since

November 2020. Excluding food and energy, prices increased by 0.5% after

up 0.8% in November.

US initial claims for state unemployment benefits,

meanwhile, unexpectedly increased from 23,000 to 230,000 for the

week ended January 8. Economists polled by Reuters had predicted

200,000 applications.

Federal funds futures on Thursday hinted at least

three rate hikes by the end of the year, a scenario that has

been evaluated since last month.

Some Fed officials, like the Fed chairman of St. Louis

James Bullard, a Federal Open Market Committee voter this year,

requested four rate hikes in 2022.

Scott Skyrm, Executive Vice President of Fixed Income and


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repo at Curvature Securities, said the federal funds market provides

a good indicator of the terminal rate, or the peak of the key rate. He

noted that federal funds futures have a final rate of


“Assuming federal funds are in the middle of the target range,

raises the target range for federal funds from 1.50% to 1.75%.

That is a total of six tightening between March and November

2023 ”, he declared.

At the end of the afternoon, the US 10-year benchmark yield

slipped 2 basis points to 1.6988%.

After auction, US 30-year yields fell 3 basis points

at 2.0413%.

On the shorter end of the curve, the 2-year US Treasury and

5-year yields, which reflect the outlook for market interest rates,

both fell 2 basis points to 0.8909% and 1.4662%


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, respectively.

US yields fell after 30-year bond auction

decent request. The high yield, however, was 2.075%, slightly

exceeded expectations by the submission deadline, which meant

investors wanted a little more premium for holding 30-year bonds.

But the other metrics were strong, with a bid-to-cover ratio,

a demand gauge of 2.35 higher than the December auction and

the average of the six previous auctions.

January 13 Thursday 4:12 PM New York / 2112 GMT

Current Net Price

Yield% change


Effects at three months 0.12 0.1217 0.000

Six-month bonds 0.275 0.2792 0.005

Two-year bond 99-186 / 256 0.8909 -0.016

Three-year bond 99-208 / 256 1.189 -0.026

Five-year bond 98-248 / 256 1.4662 -0.026

7-year rating 98-76 / 256 1.6348 -0.031

10-year rating 97-28 / 256 1.6953 -0.030

20-year bond 98-124 / 256 2.0937 -0.033

30-year bond 96-124 / 256 2.0327 -0.039


Last (bps) Net



2-year US dollar swap 19.75 1.00


3-year US dollar swap 15.50 1.25


5-year US dollar swap 8.00 0.25


10-year US dollar swap 5.50 0.00


30-year US dollar swap -17.75 -0.25


(Reporting by Gertrude Chavez-Dreyfuss; Editing by Emelia

Sithole-Matarise and Nick Zieminski)



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