June 22, 2020 / 2:00 PM / 20 days ago

TREASURIES-Risk-off trading sends longer term yields lower

    By Ross Kerber
    June 22 (Reuters) - Investors stepping back from stocks sent
longer-term U.S. Treasury yields lower on Monday as they eyed a
continuing increase in COVID-19 cases. 
    The benchmark 10-year yield was down 2.3 basis
points in morning trading at 0.6757%.
    "There are questions about whether there is too much
optimism priced into risk assets at the moment," said Ian
Lyngen, head of US rates strategy for BMO Capital Markets.
    Whether U.S. public health measures suffice to slow the
spread of the novel coronavirus will have a bigger impact on the
Treasury market this week than forthcoming economic reports, he
said.
    In the past week, several U.S. states, mainly in the West
and South, have reported a surge in cases.

    U.S. stocks opened sightly lower on Monday as concerns of a
resurgence in infections fueled worries of another setback to
business activity.
    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 lower
than on Friday's close.
    A global crunch for U.S. dollars that was a hallmark of the
early moments of the crisis appears to have passed, the latest
milestone in a remarkable turnaround in financial conditions
engineered by the Federal Reserve and other top central
banks.
    But the recovery is set to be challenging and there will be
no quick fix, Fed Chair Jerome Powell said in comments that
reinforced his recent cautionary stance.
    The two-year  U.S. Treasury yield, which
typically moves in step with interest rate expectations, was 
down less than a basis point at 0.1836% in morning trading.
      June 22 Monday 9:42AM New York / 1342 GMT
                               Price                  
 US T BONDS SEP0               178          0-23/32   
 10YR TNotes SEP0              138-240/256  0-40/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1525       0.1547    0.000
 Six-month bills               0.175        0.1776    0.003
 Two-year note                 99-227/256   0.1836    -0.004
 Three-year note               100-32/256   0.2079    -0.010
 Five-year note                99-174/256   0.3154    -0.012
 Seven-year note               99-236/256   0.5115    -0.016
 10-year note                  99-132/256   0.6757    -0.023
 20-year bond                  98-200/256   1.194     -0.038
 30-year bond                  95-168/256   1.429     -0.041
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.00        -0.50    
 spread                                               
 U.S. 3-year dollar swap         4.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap         3.25        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -50.00         0.00    
 spread                                               
                                                      
 
    

 (Reporting by Ross Kerber in Boston
Editing by Nick Zieminski)
  
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