Yields dip following cooling wage, housing, consumer confidence data
Updates through afternoon trading, updates headline, adds quote
By David Randall
NEW YORK, Jan 31 (Reuters) -Benchmark 10-year Treasury yields inched down from two-week highs on Tuesday following economic data that showed slowing wage growth and a cooling housing market, while shorter-term yields were on pace for their largest monthly decline in nearly three years.
The Employment Cost Index rose 1% in the fourth quarter, down from a peak of 1.4% in the first quarter of 2022, while wages and salaries grew 1% compared with 1.3% in the previous quarter, according to the U.S. Bureau of Labor Statistics.
Home prices, meanwhile, rose 6.8% in November compared with the same time last year, and slowed from the 8.7% gain in October, according the S&P CoreLogic Case-Shiller Home Price composite index of 20 metropolitan areas.
Consumer confidence, meanwhile, came in at 107.1 in January, below both consensus estimates of 109 and the revised December reading of 109, according to the Conference Board.
Tuesday's economic releases offered a "mixed round of information concerning the mindset of the consumer to start the new year, and one that demonstrates the headwinds facing households at this stage," said Benjamin Jeffery, a strategist on the U.S. Rates Strategy Team at BMO Capital Markets.
Rising wages and housing costs have been chief concerns of the Federal Reserve in its battle with inflation. The central bank is widely expected to raise benchmark interest rates by 25 basis points to a range of 4.50% and 4.75% at the conclusion of its policy meeting on Wednesday.
"Softer data on housing prices, wages, and consumer confidence at the turn of the year demonstrate how the Fed’s rate hikes have cooled the economy," said Bill Adams, chief economist for Comerica Bank.
The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 3.9 basis points at 4.222%. It has fallen nearly 18 basis points since the start of January, the largest monthly drop since March 2020.
The yield on 10-year Treasury notes US10YT=RR was down 2.8 basis points to 3.524%. Yields had been down as much as 5.3 basis points earlier in the session The yield on the 30-year Treasury bond US30YT=RR was down 0.6 basis point to 3.654%. Yields had dipped 3 basis points earlier in the day.
Bond yields move in the opposite direction of prices.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=RR, seen as an indicator of economic expectations, was at -70.0 basis points.
January 31 Tuesday 1:49PM New York / 1849 GMT
Price | Current Yield % | Net Change (bps) | |
Three-month bills US3MT=RR | 4.575 | 4.6934 | 0.032 |
Six-month bills US6MT=RR | 4.655 | 4.8334 | -0.016 |
Two-year note US2YT=RR | 99-209/256 | 4.2218 | -0.039 |
Three-year note US3YT=RR | 99-220/256 | 3.9253 | -0.043 |
Five-year note US5YT=RR | 99-90/256 | 3.6431 | -0.040 |
Seven-year note US7YT=RR | 99-112/256 | 3.5916 | -0.035 |
10-year note US10YT=RR | 104-236/256 | 3.5253 | -0.026 |
20-year bond US20YT=RR | 103-8/256 | 3.7807 | -0.010 |
30-year bond US30YT=RR | 106-64/256 | 3.6537 | -0.006 |
DOLLAR SWAP SPREADS | |||
Last (bps) | Net Change (bps) | ||
U.S. 2-year dollar swap spread | 27.75 | 0.00 | |
U.S. 3-year dollar swap spread | 14.00 | -0.50 | |
U.S. 5-year dollar swap spread | 5.25 | -0.75 | |
U.S. 10-year dollar swap spread | -2.75 | -0.50 | |
U.S. 30-year dollar swap spread | -39.25 | -1.50 | |
Reporting by David Randall; Editing by Bernadette Baum, Andrea Ricci and Jonathan Oatis
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