By Karen Brettell NEW YORK, Aug 14 (Reuters) - Benchmark 10-year U.S. Treasury yields approached nine-month highs on Monday as investors weighed expectations that the Federal Reserve has stopped hiking rates against the prospect of increasing bond supply. Trading conditions were thin, however, with many traders and investors away for summer vacations. This week’s main U.S. economic focus will be retail sales data for July, which will be released on Tuesday. It is expected to show a 0.4% increase in spending during the month. The Federal Reserve will also release minutes from its July 25-26 meeting on Wednesday. But there are no major catalysts that are likely to bring further clarity on Fed policy until future inflation reports and when Fed officials give their interest rate projections for the coming quarters at the central bank's Sept. 19-20 meeting. The Federal Reserve Bank of Kansas City’s annual symposium in Jackson Hole, Wyo., on Aug. 24-26 could also bring new clarity on Fed thinking. Inflation has moderated in recent months, though it remains above the U.S. central bank’s 2% annual target, and solid economic data has defied market expectations of a near-term recession. Higher rates are tightening credit conditions, however, which analysts say will eventually feed through to slowing growth and dwindling price pressures. “Core inflation is going to creep lower and it’s going to make it hard for the Fed to keep tightening,” said Tom di Galoma, managing director and co-head of global rates trading at BTIG in New York. Fed funds futures traders are pricing in a less than 50% chance of a 25 basis points hike at the Fed's November meeting, and see the U.S. central bank as most likely to begin cutting rates in May. Increasing Treasury supply is expected to pull Treasury yields higher than they would otherwise be, and counteract some of the impact of slowing growth. But increases are expected to be gradual enough to not cause any major market disruptions in the short-term. Yields rose after the Treasury Department saw soft demand for a 30-year bond auction on Thursday, though the government saw solid interest in three-year and 10-year notes last week as part of its $103 billion refunding. Benchmark 10-year yields rose two basis points on the day to 4.187%. They are holding just below the 4.206% level reached on Aug. 4, which was the highest since Nov. 8. Two-year yields gained five basis points to 4.948%. The interest rate-sensitive notes are holding below yields of 5.120% reached on July 6, which were the highest since June 2007. The inversion in the closely-watched yield curve between two- and 10-year notes deepened to minus 76 basis points. August 14 Monday 9:30AM New York / 1330 GMT Price Current Net Yield % Change (bps) Three-month bills 5.2925 5.4496 0.018 Six-month bills 5.27 5.5004 0.012 Two-year note 99-162/256 4.9478 0.053 Three-year note 99-74/256 4.6315 0.050 Five-year note 99 4.351 0.043 Seven-year note 98-66/256 4.292 0.033 10-year note 97-120/256 4.1874 0.019 20-year bond 92-72/256 4.4669 0.011 30-year bond 97-96/256 4.2812 0.009 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 0.00 0.00 spread U.S. 3-year dollar swap 0.00 0.00 spread U.S. 5-year dollar swap 0.00 0.00 spread U.S. 10-year dollar swap 0.00 0.00 spread U.S. 30-year dollar swap 0.00 0.00 spread (Reporting by Karen Brettell; Editing by Emelia Sithole-Matarise)
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3.326 EUR | -1.34% | -1.00% | 8.41M | ||
1.277 USD | -0.00% | +0.52% | - | ||
1.088 USD | +0.13% | +0.16% | - | ||
0.7339 USD | +0.03% | -0.01% | - | ||
0.6661 USD | +0.08% | -0.13% | - | ||
0.6163 USD | +0.20% | +0.93% | - | ||
0.012 USD | -0.02% | 0.00% | - | ||
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