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Two-year yields gain, long-dated Treasuries mixed after Powell speech


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NEW YORK — U.S. two-year Treasury yields

briefly popped to their highest levels since October 2007 before

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stabilizing near two-month highs on Friday after Federal Reserve

Chair Jerome Powell reiterated that the U.S. central bank will

continue to raise interest rates to fight inflation.

Powell, in a closely watched speech at the Fed’s Jackson

Hole conference, said investors should not expect the central

bank to reduce interest rates until inflation is tamed.

“While higher interest rates, slower growth and softer labor

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market conditions will bring down inflation, they will also

bring some pain to households and businesses,” Powell

said.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations, was up 2.9 basis

points at 3.403%, slightly below its high for the year of

3.4350% in June.

The rise in short-term interest rates further inverted the

yield curve, which is often seen as a signal of an upcoming

recession. The closely watched gap between yields on two- and

10-year Treasury notes was at -37.0 basis points,

compared with -31.3 basis points before Powell’s speech.

The yield on 10-year Treasury notes was up 0.9

basis point to 3.033%. The yield on the 30-year Treasury bond

was down 2.7 basis points to 3.207%.

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Yields rise as bond prices fall.

“Powell’s comments were remarkably in line with market

expectations,” said Ian Lyngen, head of U.S. rates strategy at

BMO Capital Markets. “Overall, the response is well within the

recent range in nominal terms, even if the curve appears biased

to break out lower.”

August 26 Friday 1:55PM New York / 1755 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 2.785 2.843 0.043

Six-month bills 3.1475 3.2417 0.018

Two-year note 99-181/256 3.4028 0.029

Three-year note 99-60/256 3.3986 0.035

Five-year note 99-174/256 3.1948 0.038

Seven-year note 99-240/256 3.135 0.025

10-year note 97-140/256 3.0371 0.013

20-year bond 99-12/256 3.4413 -0.020

30-year bond 95-252/256 3.2096 -0.024

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 32.75 -0.50

spread

U.S. 3-year dollar swap 14.00 0.00

spread

U.S. 5-year dollar swap 7.75 0.50

spread

U.S. 10-year dollar swap 8.50 0.25

spread

U.S. 30-year dollar swap -28.75 0.50

spread

(Reporting by David Randall

Editing by Chizu Nomiyama, Nick Zieminski and Leslie Adler)



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