Band Herbert Lash

NEW YORK, July 26 (Reuters)you.S. Treasury yields trended lower on Tuesday, led by a flight to safety following the latest gas supply cuts from Russia at Europe and growing concerns about an economic slowdown in the United States, as Walmart’s earnings warning shows.

The yield differential between two- and ten-year Treasury bills US2US10=RRseen as a recession signal when the short yield is higher than the long yield, reversed for more than two weeks and widened further to -25.7 basis points.

After falling earlier, the two-year rate US2YT=RR the yield rose 2.2 basis points to 3.057%, as the decline in 10-year bonds US10YT=RR fell 1.9 basis points to 2.801%.

JThe flight to quality makes sense if you are concerned about a significant slowdown in growth or even heightened fears of recession in Europe due to volatility in energy supply,” said Subadra Rajappa, chief strategy officer at US rate at Societe Generale. “So you should see investors flocking to Treasuries.”

After an early rise in prices, which move in the opposite direction to yields, bonds pared gains, perhaps anticipating a widely expected 75 basis point interest rate hike by the Federal Reserve on Wednesday at the end of the month. a two-day political meeting.

Wednesday’s Fed statement is likely to focus on pushing inflation away from its 2% target, rather than the drag the policy appears to have on the pace of economic activity, it said. Steven Ricchiuto, Chief US Economist at Mizuho Securities USA LLC.

“This continued focus on inflation should reset market expectations and lead to a further inversion of the 2y/10y portion of the curve, primarily through higher short rates,” Ricchiuto said in a note.

The Treasury sold $46 billion of five-year notes at a high yield of 2.860%. The demand was decent, Rajappa said.

The Treasury will auction $38 billion worth of seven-year notes on Thursday.

Shares of Walmart Inc. WMT.N fell 7.9% after the major US retailer slashed its profit forecast, a stark indication of its customers’ pullback from discretionary buying as they battle the impact of high inflation.

Another closely watched part of the yield curve, the spread between three-month and 10-year bills US3MUS10Y=TWEBnarrowed to 27.1 basis points from a spread of 118.51 at the July 1 close. An inversion could mean a recession.

Russia tightened its gas tightening on Monday. Gazprom GAZP.MM said supplies through the Nord Stream 1 gas pipeline to Germany would fall to just 20% of capacity.

The supply crisis and calls for energy rationing are expected to tip the euro currency bloc into recession, while inflation remains high.

The yield of the 30-year Treasury bond US30YT=RR was down 2.6 basis points to 3.024%.

The five-year U.S. Treasury Inflation-Protected Securities (TIPS) break-even rate US5YTIP=RR was last at 2.589%.

The 10-year TIPS break-even rate US10YTIP=RR was last at 2.359%, indicating that the market expects inflation to average around 2.4% per year for the next decade.

The US dollar 5-year inflation-linked swap USIL5YF5Y=Rconsidered by some to be a better indicator of inflation expectations due to possible distortions caused by the Fed’s quantitative easing, last stood at 2.404%.

July 26 Tuesday 3:19 p.m. New York / 1919 GMT

Price

Current yield %

Net change (bps)

Three-month bills US3MT=RR

2.48

2.5305

-0.031

Half-yearly invoices US6MT=RR

2.895

2.9789

-0.010

Two-year ticket US2YT=RR

99-228/256

3.0568

0.022

Three-year ticket US3YT=RR

99-250/256

3.0081

0.025

Five-year ticket US5YT=RR

101-150/256

2.9019

0.002

Seven-year note US7YT=RR

102-72/256

2.8841

-0.011

10 year ticket US10YT=RR

100-156/256

2.8032

-0.017

20 year bond US20YT=RR

99-176/256

3.2713

-0.023

30 year bond US30YT=RR

97-12/256

3.026

-0.024

DOLLAR EXCHANGE GAP

Last (bps)

Net change (bps)

2-year US dollar swap spread

11:25 p.m.

0.75

3-year US dollar swap spread

8.75

0.75

5-year US dollar swap spread

0.50

1.00

10-year US dollar swap spread

7.50

0.25

30-year US dollar swap spread

-24.50

1.00

(Reporting by Herbert Lash editing by Mark Heinrich)

(([email protected]; 1-646-223-6019; Reuters Mail: [email protected]))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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