U.S. yields rise ahead of data, in wake of Amazon corporate supply



By Gertrude Chavez-Dreyfuss

NEW YORK, Nov 29 (Reuters) - U.S. Treasury yields rose in choppy trading on Tuesday, as investors braced for a slew of data starting on Wednesday, which could reinforce expectations for a slower pace of Federal Reserve rate increases and ahead of a highly-anticipated corporate bond deal from Amazon.

Investors this week are awaiting U.S. data on gross domestic product for the third quarter, Chicago manufacturing numbers, factory activity based on the Institute for Supply Management, as well as non-farm payrolls for November.

"It's going to be a busy second half of the week with all the data points we're expecting. But the main focus will be on inflation and jobs," said Subadra Rajappa, head of U.S. rates strategy, at Societe Generale in New York.

Fed speakers this week are also expected to stick to the script: slower rate hikes for longer. Richmond Federal Reserve Bank President Thomas Barkin on Monday said he supports moving to smaller interest-rate hikes in the central bank's fight to bring down too-high inflation.

Fed funds futures have priced in a 63.5% chance of a 50 basis-point hike at a policy meeting this month, and an 88% chance of another such rate hike in February FEDWATCH .

"It's really a question of how they will change the dots at the meeting for the upcoming year," Rajappa said, referring to the Fed's interest rate projections.

Investors also sold Treasuries as they anticipate details about Amazon's AMZN.O multi-tranche corporate bond deal.

The deal features two-year, three-year, five-year, seven-year, and 10-year notes. The initial price talk on the maturities is U.S. Treasuries plus 45 basis points (bps, 55 bps, 85 bps, 100 bps, and 115 bps, respectively.

Wall Street dealers typically looked to lock in borrowing costs for corporate bonds they are underwriting. As part of that process, a dealer sells Treasuries as a hedge to lock in the borrowing cost on the bond issue before the deal is completed. Once the bond is sold, the dealer buys Treasuries to exit the "rate lock."

"We are the low end of the range yields. When you see corporate supply as a factor, we tend to see a little sell-off," Rajappa said.

In late morning trading, the yield on 10-year Treasury notes US10YT=RR was up 2.9 bps at 3.731%. U.S. 10-year yields rose as well after data showed that consumers' 12-month inflation expectations increased to 7.2% from 6.9% last month.

The U.S. consumer confidence index, however, fell to 100.2 this month from 102.2 in October.

The yield on the 30-year Treasury bond US30YT=RR was

up 2.7 b

ps at

3.776

%.

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 was at -74.6 bps. An inversion of this curve typically precedes recession.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 0.2 bps at 4.473%.

November 29 Tuesday 10:27AM New York / 1527 GMT

Price

Current Net

Yield % Change

(bps) Three-month bills US3MT=RR 4.28

4.3874

-0.015 Six-month bills US6MT=RR

4.5575

4.7298

-0.005 Two-year note US2YT=RR

100-20/256 4.4587

-0.012 Three-year note US3YT=RR

100-190/256 4.2298

0.000 Five-year note US5YT=RR

99-224/256 3.9028

0.011 Seven-year note US7YT=RR

100-72/256 3.8288

0.018 10-year note US10YT=RR

103-84/256 3.7218

0.020 20-year bond US20YT=RR

100-32/256 3.9907

0.016 30-year bond US30YT=RR

104-16/256 3.7724

0.023

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap

31.50

0.00

spread

U.S. 3-year dollar swap

12.00

-1.00

spread

U.S. 5-year dollar swap

4.50

-1.00

spread

U.S. 10-year dollar swap

-3.75

-0.50

spread

U.S. 30-year dollar swap

-44.75

0.00

spread


Reporting by Gertrude Chavez-Dreyfuss Editing by Nick Zieminski

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.