TREASURIES-Benchmark yield dips after Fed’s Powell says economy still needs support

(Reuters) - The benchmark 10-year U.S. Treasury yield
fell on Tuesday after Federal Reserve Chairman Jerome Powell
said the economy still needed central bank support.
    The 10-year note was down 1.4 basis point at
1.3551% in afternoon trading. It touched a high of 1.389% early
Tuesday before Powell testified at a U.S. Senate Banking
Committee hearing in Washington.
    Powell said interest rates would remain low and the Fed's
bond purchases would continue "at least at the current pace
until we make substantial further progress towards our goals ...
which we have not really been making."
    Analysts said the market's move showed that Powell's remarks
reinforced status quo expectations, that the Fed remains dovish
despite some inflation concerns.
    "His basic stance was the same and it provided some
reassurance to the bond market," said Julia Coronado, president
of analysis firm Macropolicy Perspectives. "In Powell's
even-keeled way he said, 'Our job is far from over. We're going
to be here buying Treasuries for some time.'"
    Expectations of a consumer price uptick have significantly
boosted yields on longer-term U.S. debt since the summer.
Shortly before Powell's testimony, the 30-year bond
yield hit 2.34%, the highest since early January 2020.
    It was still up 1.3 basis points at 2.1927% on Tuesday
afternoon, reflecting investors' longer-term inflation
expectations.
    A $60 billion U.S. Treasury auction of 2-year notes was
"uneventful" according to a note from BMO Capital Markets rates
strategist Ben Jeffery. It had a high yield of 0.119%, the
lowest on record, and a bid-to-cover ratio of 2.44 versus an
average of 2.57.
    The Nasdaq composite index fell in volatile trading 
as investors sold off mega-cap growth stocks on valuation
concerns.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 124 basis points, about a basis point below
Monday's close.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was little
changed at 0.1169%.
    
        February 23 Tuesday 1:42PM New York / 1842 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0325       0.033     0.000
 Six-month bills               0.05         0.0507    0.003
 Two-year note                 100-4/256    0.1169    0.002
 Three-year note               99-184/256   0.2199    -0.005
 Five-year note                99-2/256     0.5793    -0.018
 Seven-year note               98-116/256   0.9813    -0.014
 10-year note                  97-220/256   1.3551    -0.014
 20-year bond                  97-144/256   2.024     0.005
 30-year bond                  93-12/256    2.1927    0.013
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.00         0.00    
 spread                                               
 U.S. 3-year dollar swap        10.50        -0.25    
 spread                                               
 U.S. 5-year dollar swap        13.00         0.00    
 spread                                               
 U.S. 10-year dollar swap        8.00        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -24.75        -1.25    

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