Sense of risk, Fed talks about raising yields

CHICAGO, Dec. 2 (Reuters) – U.S. Treasury yields rose on Thursday as investors retracted riskier assets and Federal Reserve officials announced an earlier end to central bank bond purchases .

The benchmark 10-year yield, which had fallen to a session low of 1.409%, was last one basis point higher at 1.4375%. Yields move in the opposite direction to prices.

The 30-year yield was down 2.8 basis points to 1.7499%. Earlier in the session, it fell to its lowest level since January at 1.737%, benefiting from the flight-to-quality trade sparked by concerns about the impact of the COVID-19 Omicron variant. Read more

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The two-year yield hit a one-week high at 0.63%. It was last up 5.8 basis points to 0.6206%.

Jim Vogel, an interest rate strategist at FHN Financial in Memphis, Tennessee, pointed to the rally on Wall Street, where the S&P 500 rose about 1.4%.

“You have a little movement back into risky assets, but more importantly you have Fed speakers on the band reinforcing the faster cut message,” he said.

“Everyone in the market is reading tea leaves that a faster taper improves the chances, if not guarantees the chances, that we’re going to see a hike in the first half based on what we know now,” said added Vogel.

Atlanta Federal Reserve Chairman Raphael Bostic told Reuters Next on Thursday that it would be appropriate to complete the cut to the central bank’s bond purchase program by the end of March. Read more

He also said that if inflation continued to hit 4% until next year, that would be a good argument for pushing interest rate hikes forward.

At another event, San Francisco Fed President Mary Daly said it might be time to start crafting an interest rate hike plan to deal with inflation above. the goal. Read more

A rate outlook released Thursday by BofA Global Research pegged the 10-year yield at 1.75% in the first quarter of 2022, rising to 2% in the fourth quarter.

Investors also backed down on risky US corporate bonds, which ended their worst month on Tuesday since the start of the pandemic. Read more

Exchange-traded fund iShares iBoxx High-Yield Corporate Bond (HYG.P) recouped some losses from Wednesday’s drop to $ 85.32, its lowest level since November 2020. It closed Thursday up about 0 , 7% to $ 86.

Meanwhile, some Treasuries maturing this month were trading at high yields, fearing the U.S. government would run out of cash within two weeks. Read more

On Friday, all eyes will be on the U.S. government’s jobs report. According to a Reuters survey of economists, non-farm payrolls probably increased by 550,000 jobs in November after increasing by 531,000 in October. The unemployment rate is expected to drop to 4.5% from 4.6% in October.

Ahead of the data, the ADP’s national employment report released on Wednesday showed private payrolls increased by 534,000 last month, while the Labor Department said on Thursday that initial claims for benefits from State unemployment rose by 28,000 to seasonally adjusted 222,000 for the week ended November 27. Read more

“With the ADP count, the number of claims, the employment history appears to be intact and pretty solid, so (the jobs report) would have to be something that is aggressively stronger or weaker to derail this. story, ”said Tony Rodriguez, head of bond strategy at Nuveen.

Yield curves flattened, with the closely watched spread between two-year and 10-year bond yields at their lowest in 11 months. It was down 2.8 basis points for the last time at 82.10 basis points.

The five-year and 30-year bond yield curve was 5.5 basis points flatter to 54.80 basis points.

The US Treasury on Thursday announced auctions next week for $ 54 billion in three-year bonds, $ 36 billion in 10-year bonds and $ 22 billion in 30-year bonds.

December 2 Thursday 4:09 PM New York / 2109 GMT

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Reporting by Karen Pierog, Tom Westbrook and Yoruk Bahceli; Editing by Devika Syamnath, Angus MacSwan, Susan Fenton, Dan Grebler and Richard Chang

Our Standards: Thomson Reuters Trust Principles.

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