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TREASURIES-Record low yield in 10-year auction shows strong demand

 (Updates with trading activity, 10-year note auction results)
    By Ross Kerber and Noel Randewich
    July 8 (Reuters) - The U.S. sold $29 billion worth of
10-year notes for the lowest high yield on record on Wednesday,
indicating strong demand for the safe-haven securities despite a
flood of new issuance to fund economic stimulus in response to
the coronavirus pandemic.
    The high yield was 0.653% in the auction of the benchmark
notes, the U.S. Treasury Department said. That 
compared to the previous high yield of 0.7% in May, and
continuing a trend from Tuesday when 3-year notes
also sold for the lowest high yield ever.
    Bids accepted from non-dealers accounted for 80.3% of the
sale, compared with an average of 71.5%, according to a note
from BMO Capital Markets.
    Following the auction, Treasury yields were stable for the
session, with the 10-year yield was down less than a basis point
at 0.6463%.
    Analysts said the auction showed investors were willing to
look past rising U.S. deficits and the ongoing pandemic, perhaps
because the securities still return more than the debt of other
governments.
    "It was definitely an auction that was well received by
primary market participants," said BMO Capital Markets rates
strategist Ben Jeffery.
    “As the world’s preferred save haven assets, the structural
demand for Treasuries is always going to be a natural outlet for
those looking for safety, and even more with low or negative
interest rates in Europe," he said.
    Wall Street edged higher in choppy trading, supported by
technology shares as early signs of an economic rebound overrode
fears of another lockdown due to a jump in coronavirus cases
across the country.
    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 49 basis points, about a basis point higher
than at its close on Tuesday and near its level since mid-June.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down less
than a basis point at 0.1567% in afternoon trading.
    
      July 8 Wednesday 1:32PM New York / 1732 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.145        0.1475    0.000
                                                      
 Two-year note                 99-240/256   0.1567    -0.008
 Three-year note               99-212/256   0.1825    -0.008
 Five-year note                99-206/256   0.2896    -0.003
 Seven-year note               100-24/256   0.4863    0.000
 10-year note                  99-204/256   0.6463    -0.002
 20-year bond                  99-144/256   1.1497    -0.007
 30-year bond                  96-188/256   1.3839    -0.005
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.75         0.50    
 spread                                               
 U.S. 3-year dollar swap         3.75         0.00    
 spread                                               
 U.S. 5-year dollar swap         2.50         0.00    
 spread                                               
 U.S. 10-year dollar swap       -3.25        -0.25    
 spread (Reporting by Ross Kerber in Boston and by Noel Randewich in
San Francisco. Editing by Nick Zieminski and Bernadette Baum)
  
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