* Fed expected to hike interest rates on Wednesday
* New Fed economic forecasts awaited
* 30-year yields hit roughly 3-month high
* Most yields remain below highs hit on Friday
* Corporate supply pressures yields higher
(Updates prices, adds analyst comment)
By Sam Forgione
NEW YORK, March 13 U.S. Treasury yields edged
higher on Monday in anticipation of a Federal Reserve interest
rate increase on Wednesday, nervousness that the central bank
could indicate a more aggressive pace of future rate hikes, and
new corporate bond supply.
Interest rates futures implied traders saw a 95.2 percent
chance the Fed would announce it was raising rates by a quarter
percentage point at the end of its two-day policy meeting, CME
Group's FedWatch program showed. Those expectations were up from
88.6 percent on Friday.
Worries that the Fed's new economic forecasts will signal a
more aggressive pace of monetary tightening also pushed yields
higher, analysts said.
"There's definitely a risk that you see a little bit more of
a hawkish dot plot," said Justin Lederer, an interest rate
strategist at Cantor Fitzgerald in New York, in reference to the
Fed forecasts. He said, however, that Cantor Fitzgerald was
still expecting just three rate hikes this year.
That would be in line with the median view of Fed
policymakers in their December projections. JPMorgan economist
Michael Feroli said on Friday that the median number of rate
increases in 2017 expected by Fed policymakers may grow to four.
Prices for benchmark 10-year Treasuries were
last down 9/32 to yield 2.615 percent, from a yield of 2.582
percent late on Friday. U.S. 30-year Treasuries prices
were down 18/32 to yield 3.201 percent, inching just
above Friday's session high to mark a roughly three-month peak
Two-year yields, which are considered the most
vulnerable to Fed policy, were last up about two basis points
from late Friday at 1.376 percent.
Yields on Treasuries maturing between seven and 30 years hit
their highest levels since mid-December on Friday, with 10-year
yields reaching 2.624 percent. Five-year yields hit their
highest level since April 2011, while three-year yields touched
their highest level since April 2010 and two-year yields reached
their highest level since June 2009.
A succession of corporate bond issuance this week likely
pressured yields higher as well, said Charles Comiskey, head of
Treasuries trading at Bank of Nova Scotia in New York.
Trading volumes were light on Monday as traders awaited the
Fed policy statement before taking bigger bets, analysts said.
March 13 Monday 3:50PM New York / 1950 GMT
US T BONDS JUN7 146-9/32 -0-18/32
10YR TNotes JUN7 122-196/256 -0-64/25
Price Current Net
Yield % Change
Three-month bills 0.7375 0.7491 0.002
Six-month bills 0.9075 0.9242 0.033
Two-year note 99-132/256 1.376 0.017
Three-year note 99-210/256 1.6867 0.022
Five-year note 98-204/256 2.1317 0.027
Seven-year note 98-16/256 2.4291 0.030
10-year note 96-216/256 2.613 0.031
30-year bond 96-48/256 3.1988 0.029
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 33.50 0.00
U.S. 3-year dollar swap 25.75 0.00
U.S. 5-year dollar swap 10.00 0.00
U.S. 10-year dollar swap -3.00 -0.25
U.S. 30-year dollar swap -38.00 0.25
(Reporting by Sam Forgione; Editing by Paul Simao and Richard