(Recasts with data, add quotes, details, updates prices) By Karen Brettell NEW YORK, April 21 (Reuters) – Treasury yields rose on Friday after data showed U.S. business activity picked up in April and while investors await the upcoming May Federal Reserve meeting for further guidance on whether further interest rate hikes are possible. US business activity hit an 11-month high in April, contradicting growing signs that the economy is at risk of falling into a recession as higher interest rates cool demand. The jump in yields, however, is likely due to thin trading conditions, with the data unlikely to sway Fed policy, said Lou Brien, a market strategist at DRW Trading in Chicago. The benchmark 10-year yield, which is trading below that of shorter-dated debt, continues to reflect concerns about economic growth. “The high end is signaling that there is economic trouble ahead, or current economic trouble,” Brien said. “If there is a bid for Treasuries, part of that bid is from businesses or investors who are not deploying that money in the real world – not building a factory, not expanding a business. world event.” Investors are looking into whether the Fed is likely to keep raising rates after an expected 25 basis point hike at its May 2-3 meeting as the US central bank focuses on lowering inflation, while markets in labor remains stable. “It really comes down to what the Fed says, how they describe the May hike, whether they say it’s the end, or whether they keep the door open,” said Gennadiy Goldberg, TD’s senior interest rate strategist. Securities in New York. Ten-year Treasury yields ended at 3.570%, up 3 basis points on the day. The two-year yield rose 2 basis points to 4.192%. The inversion of the yield curve between two-year and 10-year yields widened to minus 62 basis points. The benchmark 10-year yield rose from a seven-month low touched on April 6 as the banking sector showed stabilization, following the collapse of two regional banks including Silicon Valley Bank in the middle -mid March. However, the 10-year yield also failed to break above the 3.65% area, with investors wary of taking more short positions in case of new negative banking headlines. Traders are also worried about whether the US Congress will raise the debt ceiling in time to avoid a catastrophic US debt default. “The market is still reluctant to be short, because it exposes them to asymmetric downside risk in the event of any bad headlines,” said Goldberg. “What we’re seeing is more buying on dips; when prices rise, we see investors come in and be more willing to be long Treasuries. One-month Treasury bill yields traded near six-month lows as investors sought short-term debt maturing before the Treasury is expected to reach its debt limit. The bills are being demanded over concerns about the safety of bank deposits due to new bank stress. But some investors want to avoid debt that matures if there is a risk that the United States will hit the debt ceiling, which is seen as likely to happen in late July or August. The one month fee is the last of 3.485%. April 21 Friday 10:51AM New York / 1451 GMT Price Current Net Yield % Change (bps) Three-month note 4.97 5.1003 -0.001 Six-month note 4.8625 5.0653 0.006 Two-year note 99-606 Two-year note 99-606 99-154/256 3.8928 0.017 Five-year letter 99-210/256 3.6647 0.025 Seven-year letter 100-8/256 3.6196 0.026 10-year letter 99-1038/5696 99-1038/5616 0.025 30-year bond 97-80/256 3.7757 0.023 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) US 2-year dollar swap 27.50 -0.75 spread US 3-year dollar swap 17.50 -0.50year dollar spread US 7.50 0.25 spread US 10-year dollar swap -0.50 0.50 spread US 30-year dollar swap -41.25 0.00 spread (Reporting by Karen Brettell; Editing by Susan Fenton and Jonathan Oatis)
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