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Traders slowed their selling of U.S.

Treasuries on Wednesday, leaving yields little changed, as they

kept an eye on government budget talks in Washington.

The benchmark 10-year yield was up 1 basis point

at 1.5462% while yields on shorter-term debt were lower. After

four consecutive sessions in which the 10-year yield rose, the

yield fell as low as 1.494% on Wednesday morning before finding

support.

Analysts said investors were taking stock after Treasury

market moves of recent days and trying to forecast how

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negotiations on U.S. spending plans might resolve.

“The momentum is all on the bear side of this,” said Kim

Rupert, senior economist for Action Economics.

Major Wall Street indexes were higher, boosted by technology

stocks and aircraft maker Boeing Co.

Congress on Wednesday was facing a two-day deadline until

the federal government begins shutting many of its operations

unless Democrats in Congress reach a deal to provide funding for

the fiscal year that begins Friday.

For now, investors expect some kind of deal that avoids big

disruptions to the Treasury market, said Rupert of Action

Economics and Padhraic Garvey, head of research for ING

Americas. But a continued impasse would eventually pressure the

market, for example if ratings agencies downgraded the United

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States.

In addition, investors are focused on when the Federal

Reserve may begin to unwind its support for the economy, though

the Fed has indicated it still needs to see further progress

toward its employment and inflation goals.

“There’s headwinds out there, and it does make sense for us

to have a bit of a pause here,” Garvey said.

On Tuesday, U.S. Treasury Secretary Janet Yellen again

warned the government was close to exhausting its borrowing

capabilities – now set for Oct. 18. The deadline

has worried the market for Treasury bills with yields on

short-term debt now higher than some longer-term issues. https://tmsnrt.rs/39QboZz

The yield on the one-month bill spiked as high as

0.086% on Tuesday, the highest since the first quarter of 2021.

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It fell back on Wednesday and was last at 0.0507% after U.S.

House of Representatives Speaker Nancy Pelosi said Congress will

move to pass legislation that would suspend the debt limit.

The trading left little changed 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. It was at 124 basis points,

about the same as Tuesday’s close.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations, was down about a

basis point at 0.299%.

The 10-year TIPS yield was at -0.833% and the

breakeven inflation rate was at 2.396%.

September 29 Wednesday 2:43PM New York / 1843 GMT

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Price Current Net

Yield % Change

(bps)

Three-month bills 0.04 0.0406 0.000

Six-month bills 0.05 0.0507 -0.005

Two-year note 99-231/256 0.299 -0.008

Three-year note 99-134/256 0.5376 -0.018

Five-year note 99-84/256 1.0132 -0.011

Seven-year note 99-94/256 1.345 -0.001

10-year note 97-76/256 1.5462 0.010

20-year bond 95-56/256 2.0439 0.024

30-year bond 97-224/256 2.096 0.026

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 8.25 -0.25

spread

U.S. 3-year dollar swap 12.50 -0.25

spread

U.S. 5-year dollar swap 7.50 -0.50

spread

U.S. 10-year dollar swap !Empty !Empty

spread value value

U.S. 30-year dollar swap -25.25 -0.50

spread

(Reporting by Ross Kerber in Boston; Editing by Nick Macfie and

Leslie Adler)