July 30, 2020 / 2:32 PM / 16 days ago

TREASURIES-Poor Q2 data, Trump tweet send yields to lowest in months

    By Ross Kerber
    July 30 (Reuters) - Traders drove U.S. Treasury yields to
their lowest in months on Thursday after data showed the U.S.
economy contracted at its steepest pace in decades and President
Donald Trump tweeted about delaying the upcoming election. 
    The benchmark 10-year yield was down 4.1 basis
points at 0.5397% in morning trading after reaching as low as
0.538%, its lowest since March 9.
    Yields on other Treasuries also fell as investors bought up
the government bonds as safe havens against both economic and
political uncertainty.
     Some of the decline came after the Commerce Department said
gross domestic product fell at a 32.9% annualized rate in the
second quarter, largely in April after restaurants, bars and
factories had to shutter to slow the spread of the COVID-19
pandemic.
    Soon after, Trump raised the possibility of delaying the
nation's November presidential election. Trump, without
evidence, repeated his claims of mail-in voter fraud and wrote
on Twitter:  "delay the election until people can properly,
securely and safely vote???"
    Both events turned investors more cautious, with major U.S.
stock indexes opening lower. The economic data
reinforced the inclination of the Federal Reserve to add to
accommodative policy, said Priya Misra, head of global rates
strategy for TD Securities.
    Meanwhile Trump's tweet cast doubt on whether the U.S.
election will be conducted smoothly, market analysts said. 
    "Certainly President Trump's tweet was read as a negative in
the equity and bond markets. It created a risk-off trade," said
Tom di Galoma, managing director of Seaport Global Holdings.    
    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, was at 42 basis points, about 2 basis points lower
than Wednesday's close and well below its level of 68 basis
points on June 5.
    
          July 30 Thursday 9:55AM New York / 1355 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0963    -0.005
 Six-month bills               0.1025       0.1043    -0.008
 Two-year note                 100-2/256    0.1211    -0.008
 Three-year note               99-248/256   0.1356    -0.013
 Five-year note                100-26/256   0.2296    -0.023
 Seven-year note               99-212/256   0.3999    -0.034
 10-year note                  100-208/256  0.5397    -0.041
 20-year bond                  102-200/256  0.9702    -0.052
 30-year bond                  101-120/256  1.1913    -0.053
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.75        -0.75    
 spread                                               
 U.S. 3-year dollar swap         5.75        -0.50    
 spread                                               
 U.S. 5-year dollar swap         4.00         0.00    
 spread                                               
 U.S. 10-year dollar swap       -0.50         0.50    
 spread                                               
 U.S. 30-year dollar swap      -41.50         0.25    
 spread                                               
                                                      
 

 (Reporting by Ross Kerber in Boston; Editing by Andrea Ricci)
  
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