March 3, 2020 / 3:44 PM / 3 months ago

TREASURIES-U.S. yields mixed after Fed cuts rates by 50 basis points in coronavirus move

    * Fed cuts rates by 50 basis points
    * U.S. yield curve steepens

 (Recasts, adds analyst comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 3 (Reuters) - U.S. Treasury yields were
mixed in choppy trading, after moving higher for most of the
morning session, as the Federal Reserve slashed interest rates
by 50 basis points to ease the economic fallout from the
fast-spreading coronavirus.
    In a statement, the central bank said it was cutting rates
by a half percentage point to a target range of 1.00% to 1.25%.
    "The fundamentals of the U.S. economy remain strong.
However, the coronavirus poses evolving risks to economic
activity. In light of these risks and in support of achieving
its maximum employment and price stability goals, the Federal
Open Market Committee decided today to lower the target range
for the federal funds rate," the Fed said a statement.

    U.S. long-dated yields were still up on the day, but came
off session highs.
    In morning trading, U.S. 10-year yields were at 
1.098%, from 1.088% late on Monday.
    Yields on U.S. 30-year bonds were also higher 
at 1.690%, from 1.645% on Monday.
    On the short end of the curve, U.S. two-year yields fell to
0.774% from Monday's 0.878%, after hitting a nearly
four-year low of 0.826%. 
    The yield curve steepened after the Fed announcement, with
the spread between the two-year and 10-year widening to 32 basis
points from 25.8 basis points on Monday.     
    "The biggest takeaway from here is the steepening of the
curve, the 2s/10s jumped almost 7 basis points," said Justin
Lederer, Treasury analyst at Cantor Fitzgerald in New York.
    "It's a big, big steepening here," Lederer said.
    "... I’m surprised that it's today," he said of the Fed's
rate cut. "I'm not surprised that they went, but I thought it
would be more of a coordinated and not out of the blue at 10
O’clock."
    
    March 3 Tuesday 10:32AM New York / 1532 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.0475       1.0678    -0.101
 Six-month bills               0.92         0.9371    -0.090
 Two-year note                 100-176/256  0.776     -0.050
 Three-year note               101-180/256  0.7899    -0.038
 Five-year note                101-108/256  0.8334    -0.031
 Seven-year note               101          0.9766    -0.019
 10-year note                  103-224/256  1.088     0.000
 30-year bond                  107-160/256  1.6752    0.030
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.75        -0.75    
 spread                                               
 U.S. 3-year dollar swap         4.25        -1.50    
 spread                                               
 U.S. 5-year dollar swap         5.25        -1.00    
 spread                                               
 U.S. 10-year dollar swap       -2.75        -1.00    
 spread                                               
 U.S. 30-year dollar swap      -39.00        -1.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional by Karen
Brettell; editing by Jonathan Oatis)
  
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