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Treasury bond yields fall, market sees very aggressive Fed rate hike scenario earlier than estimated

Por Gertrude Chavez-Dreyfuss

NEW YORK, Apr 6 (Reuters) – Returns on US government debt fell on Tuesday, led by the middle of the curve, as investors considered the scenario based on an earlier-than-expected monetary tightening by the US to be too aggressive. Federal Reserve.

* The decline was led by the 5-year yield, which fell nearly 5 basis points to 0.896% after hitting 14-month highs on Monday. The yield on the 7-year bond was down 4 points at 1.363%.

* 5-year paper trading generally reflects investors’ views on interest rate expectations, analysts said.

* The median of Fed officials’ projections of the number of rate movements is commonly referred to as their “dot plot.” At its monetary policy meeting in March, the Fed said it does not expect to raise interest rates until 2023.

* However, Eurodollar futures, the most liquid interest rate market, traded on Tuesday fully considering a Fed rate hike for December 2022, and two rate hikes in 2023 following positive March figures. in non-farm payrolls and in the country’s services index, which hit a record high.

* TD Securities and Barclays, following the US jobs data released on Friday, recommended buying 5-year notes, citing a wrong market estimate of interest rate expectations.

* In mid-morning trading, the 10-year bond yield was down to 1.68% from 1.72% on Monday. The 30-year paper return fell to 2.347% from 2.363% on Monday.

* At the short end of the curve, the 2-year yield was down to 0.164% from 0.174% on Monday. The yield curve between the two-year and 10-year securities flattened out at 151.70 basis points.

(Reporting by Gertrude Chavez-Dreyfuss; Edited in Spanish by Janisse Huambachano)

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