March 4, 2020 / 9:26 PM / a month ago

REFILE-TREASURIES-U.S. 10-year yield rises above 1% as stocks strengthen

 (Clarifies 10-year note yield move in lead)
    * Yield curve steepens for 2nd day
    * Biden's Super Tuesday victory debt-friendly - analyst
    * Upbeat U.S. economic data fails to lift market sentiment

    By Karen Pierog and Gertrude Chavez-Dreyfuss
    NEW YORK, March 4 (Reuters) - U.S. benchmark Treasury
10-year yields climbed above 1% on Wednesday as stronger U.S.
equities blunted safety-bid moves to fixed income.
    Yields hit a session high of 1.043% in afternoon trading
after largely staying just below 1% where they landed for the
first time ever on Tuesday.
    "Yields are moving with stocks," said Lou Brien, market
strategist, at DRW Trading in Chicago. 
    "Now this pushed it to the end of the day where people are
probably taking profits off the volume trade in the Treasury
market," he added.
    Yields on 30-year bonds also rose, reaching a session high
of 1.689%.
    U.S. long-dated Treasury yields hit record lows on Tuesday
following the Federal Reserve's 50-basis-point rate cut in
response to the economic fallout from the rapidly spreading
coronavirus.
    Robert Robis, chief fixed income strategist at BCA Research
in New York City, said Treasuries were still trading off the
rate cut, which overshadowed overnight presidential primary
results.
    "Bonds are catching a bid because of uncertainty," he said.
    As for former Vice President Joe Biden's return to
front-runner status over Bernie Sanders in the Super Tuesday
Democratic primaries, Robis said "a Biden presidency sounds more
debt-friendly than a Sanders presidency."
    The yield curve continued to steepen on Wednesday, with the
spread between the two-year and 10-year widening to 34.40 basis
points from 29.8 basis points on Tuesday.
    Another key yield curve gauge also has steepened, with the
spread between three-month bills and 10-year notes at 28 basis
points, marking the widest spread since mid-January.  
    "What the Fed did yesterday ensures that the yield curve
will maintain some degree of steepness," said Dan Heckman,
senior fixed income strategist, at U.S. Bank Wealth Management
in Kansas City, Missouri. "Having a steep yield curve maintains
some level of confidence that ultimately we may not go into
recession, that we're just going to slow down economically."
    On the short end of the curve, U.S. two-year yields fell to
0.667% from Tuesday's 0.729%. They touched 0.614%,
the lowest in nearly four years.
    Wednesday's data was solid, with the ADP National Employment
Report showing private payrolls rose by 183,000 jobs last month,
compared with a forecast of 170,000 new jobs.
    U.S. services sector activity also accelerated to a one-year
high in February, suggesting underlying strength in the economy.
The Institute for Supply Management (ISM) said on Wednesday its
non-manufacturing activity index increased to a reading of 57.3
last month, the highest level since February 2019, from 55.5 in
January.
    
      March 4 Wednesday 4:06PM New York / 2106 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.7225       0.7359    -0.217
 Six-month bills               0.6775       0.6893    -0.164
 Two-year note                 100-230/256  0.6689    -0.060
 Three-year note               101-248/256  0.699     -0.043
 Five-year note                101-196/256  0.7635    -0.010
 Seven-year note               101-94/256   0.9225    0.007
 10-year note                  104-92/256   1.0376    0.021
 30-year bond                  107-132/256  1.6796    0.049
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.00        -1.00    
 spread                                               
 U.S. 3-year dollar swap         4.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap         5.75         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.25         1.50    
 spread                                               
 U.S. 30-year dollar swap      -40.00         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski, Tom Brown and Sonya Hepinstall)
  
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