U.S. yield curve steepens as investors pare aggressive rate hike bets



* U.S. 10-year yield hits highest since early June

* U.S. 20-year, 30-year yields touch one-week highs

* U.S. 5/30 yield curve steepens to 92.8 basis points

By Gertrude Chavez-Dreyfuss

NEW YORK, Oct 19 (Reuters) - The U.S. Treasury yield curve widened on Tuesday, as investors unwound flattening moves of the last few sessions after global central banks dampened expectations of near-term tightening that spilled over to the world's largest bond market.

The steepening of the curve extended further after weaker than-expected U.S. housing data.

The benchmark 10-year U.S. Treasury yield, meanwhile, rose to its highest in more than four months.

U.S. fed fund futures 0#FF: , which track short-term Federal Reserve rate expectations, on Tuesday priced a 64% chance of a rate hike in July next year, down from 82% on Monday. Traders also priced a 46% chance of a U.S. rate rise by June next year, down from a more than 60% chance on Monday.

The yield curve had flattened recently on expectations the Fed will tighten interest rates earlier than anticipated, pushing yields on the short end higher. The yield spread between the U.S. 5-year note and U.S. 30-year bond widened to 92.8 basis points US5US30=TWEB on Tuesday.

On Monday, the U.S. 5-year/30-year yield curve was at its flattest since late April 2020.

"The steepening of the curve today is a moderation of Fed hike expectations," said Ben Jeffery, rates strategist, at BMO Capital in New York.

"The Fed had said it will hike rates after it ends tapering but that runs counter to a June tightening that the market was pricing in. So we're probably finding a footing at a new range at this point, looking at 5s/30s between 85 and 100 basis points," he added.

The U.S. 5-year yield, which reflects Fed tightening, has been on a tear the last two weeks, hitting its highest since February 2020 at 1.193%. The yield was last down at 1.1586%.

Analysts said global central banks' dovish comments on Tuesday prompted some of the session's earlier steepening moves.

Bank of France Governor Francois Villeroy de Galhau, a member of the European Central Bank's policy-setting Governing Council, said on Tuesday there is no reason for the ECB to raise rates between now and the end of 2022 as euro zone inflation is expected to fall back below the ECB's 2% target.

Earlier, the Reserve Bank of Australia, in the minutes of its October policy meeting, said the outbreak of the Delta variant had interrupted the Australian economy's recovery. It reiterated its view of no hike in the 0.1% cash rate until 2024 given sluggish wages and inflation.

Aside from the dovish central bank messages, U.S. housing starts unexpectedly fell in September amid persistent shortages of inputs and labor. U.S. starts dropped 1.6% to a seasonally adjusted annual rate of 1.555 million units last month.

The U.S. housing report briefly weighed on long-dated yields, before they resumed gains.

In afternoon U.S. trading, U.S. 10-year yields were last up nearly six basis points at 1.6407% US10YT=RR . It hit a 4-1/2-months peak of 1.6440%.

U.S. 20-year and 30-year yields rose to one-week highs and were last up at 2.0684% US20YT=RR and 2.0897% US30YT=RR , respectively.

The long end hit their peaks after Federal Reserve Governor Christopher Waller said the Fed may have to adopt "a more aggressive policy response" if high inflation continues through the end of the year.

October 19 Tuesday 2:19PM New York / 1819 GMT

Price

Current Net

Yield % Change

(bps) Three-month bills US3MT=RR 0.055

0.0558

0.000 Six-month bills US6MT=RR

0.06

0.0609

0.000 Two-year note US2YT=RR

99-185/256 0.3932

-0.028 Three-year note US3YT=RR

99-190/256 0.7124

-0.019 Five-year note US5YT=RR

98-166/256 1.157

-0.003 Seven-year note US7YT=RR

98-156/256 1.4613

0.021 10-year note US10YT=RR

96-144/256 1.6302

0.046 20-year bond US20YT=RR

94-240/256 2.0624

0.065 30-year bond US30YT=RR

98-40/256

2.0833

0.066

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap

16.00

0.50

spread

U.S. 3-year dollar swap

14.75

-0.75

spread

U.S. 5-year dollar swap

6.50

0.00

spread

U.S. 10-year dollar swap

0.25

0.25

spread

U.S. 30-year dollar swap

-23.75

-0.75

spread


Reporting by Gertrude Chavez-Dreyfuss; Editing by Susan Fenton and Gareth Jones

Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.

Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.

Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.

Gumagamit kami ng cookies para mabigyan ka ng mahusay na karanasan sa aming website. Magbasa pa o palitan ang iyong cookie settings.

Babala sa Risk: Ang iyong kapital ay maaaring malugi. Ang mga produktong naka-leverage ay maaaring hindi para sa lahat. Tingnan ang aming Risk Disclosure.