U.S. yields slide as data keeps recession fears alive
NEW YORK — Treasury yields slid for a
third straight day on Thursday after soft U.S. consumer spending
data and still elevated consumer prices kept concerns alive that
the Federal Reserve will brake growth more than needed to curb
In a sign of a slowing U.S. economy, consumer spending rose
a less-than-expected 0.2% last month, the Commerce Department
said. It also lowered data for April to show outlays increased
0.6% instead of 0.9% as previously reported.
But inflation maintained its upward trend in May, with the
personal consumption expenditures (PCE) price index rising 0.6%
after gaining 0.2% in April. The PCE price index climbed 6.3% on
an annual basis after advancing by the same margin in April, or
more than triple the Fed’s target of 2% yearly inflation.
“The data were on the margin a little bit disappointing,”
said Kim Rupert, managing director of global fixed income at
Action Economics in San Francisco. “Clearly everybody is very
nervous about a recession with the central banks going all-in on
tackling price pressures.”
The yield on 10-year Treasury notes fell 8.9
basis points to 3.004% as safe-haven buying at the long end
pushed prices up and yields lower.
The gap between yields on two- and 10-year Treasury notes
, a commonly used metric to indicate a potential
recession when rates at the short end of the yield curve rise
above the long end, was just 3.7 basis points after flattening
to 3.14 basis points before the PCE data.
The two-year U.S. Treasury yield, which often
moves in step with rate expectations, slid 8.7 basis points to
2.966%, the first time it’s been under 3% this week.
Rates in the middle of the curve already are inverted, or
higher than the benchmark 10-year, with the three-, five- and
seven-year notes at 3.019%, 3.041% and 3.068%, respectively.
Investors are trying to determine if the Fed eases its rate
hiking cycle once inflation is seen being under control, said
Steven Ricchiuto, U.S. chief economist at Mizuho Securities in
“Inflation lags the business cycle, we already know the
economy is being hit,” he said. “How long is the lag to the Fed
saying we got inflation clearly coming down in the proper
direction, to the proper magnitude, that maybe we can extend out
the timing of the rate hikes, not reverse them.”
The yield on the 30-year Treasury bond was down
7.3 basis points to 3.139%.
The breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) was last at
The 10-year TIPS breakeven rate was last at
2.384%, indicating the market sees inflation averaging about
2.4% a year for the next decade.
The U.S. dollar five-year forward inflation-linked swap
, seen by some as a better gauge of inflation
expectations, was last at 2.420%.
June 30 Thursday 10:47 AM New York / 1447 GMT
Price Current Net
Yield % Change
Three-month bills 1.7225 1.754 -0.003
Six-month bills 2.44 2.5046 -0.010
Two-year note 100-17/256 2.9655 -0.087
Three-year note 99-152/256 3.0194 -0.109
Five-year note 100-244/256 3.0429 -0.110
Seven-year note 101-36/256 3.0676 -0.102
10-year note 98-232/256 3.0036 -0.089
20-year bond 97-232/256 3.3955 -0.068
30-year bond 94-232/256 3.1389 -0.073
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 32.75 -1.50
U.S. 3-year dollar swap 14.25 -0.50
U.S. 5-year dollar swap 3.75 0.00
U.S. 10-year dollar swap 8.00 0.25
U.S. 30-year dollar swap -23.25 0.50
(Reporting by Herbert Lash
Editing by Mark Potter)