for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up

TREASURIES-Prices fall, yield curve steepens on hopes of smaller relief package

    * Trump urges bailout for airlines, small businesses
    * U.S. yield curve steepens again
    * U.S. 10-year note auction shows solid numbers
    * Fed minutes show split on "forward guidance"

 (Adds new comment, Fed minutes, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 7 (Reuters) - U.S. Treasury prices fell on
Wednesday, amid hope there could be a relief package for
airlines, small businesses, and individuals, after President
Donald Trump scuppered talks for a comprehensive
coronavirus-related stimulus the previous session.
    Bond prices also weakened after a decent outcome for the $35
billion U.S. 10-year note auction on Wednesday, and investors
looked to the $23 billion U.S. 30-year bond sale on Thursday.
    The bid-to-cover for the 10-year note sale, a gauge of
demand, was at 2.47, higher than both the 2.30 for the September
auction and the 2.41 for the larger new issue in August.

    U.S. yields recovered following a brief fall late Tuesday
after Trump said he would suspend stimulus talks until after the
election. 
    The yield curve on Wednesday also resumed its steepening
trend on Wednesday after flattening the previous session.
    Trump said late Tuesday Congress should quickly extend $25
billion in new payroll assistance to struggling U.S. passenger
airlines, which laid off thousands of workers as air travel
remains down sharply.
    In a tweet, Trump also urged Congress to approve the $135
billion payroll protection program for small businesses and the
stimulus checks of $1,200 for individuals.
    House Speaker Nancy Pelosi criticized Trump for backing away
from talks on a comprehensive deal, but asked Treasury Secretary
Steven Mnuchin on Wednesday to review a standalone bill for $25
billion in aid to airlines, her spokesman wrote on Twitter.

    "There's still some potential for relief," said Justin
Lederer, Treasury trader at Cantor Fitzgerald in New York.
    "In a larger picture, yes, the stimulus could be delayed but
overall it would be ultimately passed. We don't know what it
would look like and it would depend on who wins the election,"
he added.
    In afternoon trading, U.S. 10-year yields rose
to 0.786%, from 0.74% late on Tuesday. Ten-year yields rose to
their highest level since June earlier on Tuesday.
    Yields on U.S. 30-year bonds were at 1.593%, up
from 1.537% the previous session. Earlier on Tuesday 30-year
yields climbed to a four-month peak.
   The yield curve steepened on Wednesday as well, with the
spread between the 10-year and two-year widening to 63 basis
points.
    A steeper curve suggests expectations of higher growth and
inflation, as the market continued to price in a victory for
Democratic challenger Joe Biden in next month's presidential
election.
    Biden's widening lead in the polls over Trump less than a
month before the election and the possibility of a Democratic
sweep in Congress have helped the steepening narrative, analysts
said. A victory for Biden and a Democratic sweep in Congress
would mean higher fiscal spending and more Treasury supply.
    Tom di Galoma, managing director at Seaport Global Holdings
in New York said a substantial steepening of the yield curve
typically follows an economic recession.
    "If the yield curve gets steeper than it is today, I think
the Federal Reserve will probably decide to do yield curve
control and start buying long-term bonds," he added. 
    Also on Wednesday, the Federal Reserve's minutes to the
September policy meeting showed policymakers were divided over
how to apply their new approach to monetary policy.
    Treasuries showed little reaction to the Fed minutes.
    
      October 7 Wednesday 2:33PM New York / 1833 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0975       0.0989    0.000
 Six-month bills               0.11         0.1116    -0.002
 Two-year note                 99-240/256   0.1567    0.010
 Three-year note               99-196/256   0.2034    0.014
 Five-year note                99-136/256   0.345     0.030
 Seven-year note               98-192/256   0.5579    0.037
 10-year note                  98-124/256   0.7851    0.045
 20-year bond                  96-16/256    1.3518    0.046
 30-year bond                  94-252/256   1.5866    0.050
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50         0.25    
 spread                                               
 U.S. 3-year dollar swap         7.25        -0.50    
 spread                                               
 U.S. 5-year dollar swap         7.00         0.25    
 spread                                               
 U.S. 10-year dollar swap        2.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -36.50         0.50    
 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Richard
Chang and Chizu Nomiyama)
  
for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up