July 22, 2020 / 6:59 PM / 13 days ago

TREASURIES-Underwhelming 20-year bond auction brings long yields off session lows

 (Recasts, updates yields; adds bond auction results, analyst
comments, upcoming TIPS auction)
    By Karen Pierog
    CHICAGO, July 22 (Reuters) - Yields of long-term U.S.
Treasuries bounced off session lows on Wednesday after an
auction of $17 billion of 20-year bonds that analysts dubbed
neutral to a bit weak. 
    The benchmark 10-year yield was last down 1.3
basis points at 0.5938%, while the 20-year bond yield
, which tumbled as low as 1.046% before the auction,
was last down 1.9 basis points at 1.0636%.
    The auction, the third since the U.S. Treasury offered
20-year bonds in May for the first time since 1986, resulted in
a high yield of 1.059%. The bid-to-cover ratio, a metric of
overall demand, was 2.43, lower than in the previous two
auctions, according to analysts.
    "I think the view of the auction is probably neutral," said
Tony Rodriguez, head of fixed income strategy at Nuveen, adding
that the sale did well in light of low rates and coming supply
of long-term debt. 
    "That just speaks to the demand that there is for long end
duration," he said.
    The 20-year bonds began trading on May 21 at a yield of
1.177%. 
    On Thursday, $14 billion of 10-year Treasury-Inflation
Protected Securities (TIPS) will be auctioned.
   Jim Vogel, an interest rate strategist at FHN Financial in
Memphis, Tennessee, said with Treasury trading "slowed to a
crawl," there was not a fundamental reason for any big moves in
yields until a deal on the next round of economic aid emerges in
Washington or the U.S Federal Reserve, which meets next week,
changes some of its outlook.
    U.S. Republicans and Democrats remained far apart on how
much to spend on stimulus efforts to combat the economic fallout
from the coronavirus pandemic.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, which is viewed as an indicator of
economic expectations, was last at 44.70 basis points, about 1
basis point lower than at Tuesday's close.
July 22 Wednesday 1:32PM New York / 1832 GMT
                               Price                  
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.12         0.1217    -0.002
 Six-month bills               0.13         0.1319    -0.002
 Two-year note                 99-245/256   0.1472    0.004
 Three-year note               99-224/256   0.1671    0.000
 Five-year note                99-234/256   0.2675    -0.003
 Seven-year note               100-96/256   0.445     -0.009
 10-year note                  100-76/256   0.5938    -0.013
 20-year bond                  101-24/256   1.0636    -0.019
 30-year bond                  98-248/256   1.2918    -0.021
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.50        -0.50    
 spread                                               
 U.S. 3-year dollar swap         5.00        -0.25    
 spread                                               
 U.S. 5-year dollar swap         3.25        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -2.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -46.50         0.50    
 spread                                               
                                                      
 



 (By Karen Pierog in Chicago; editing by Jonathan Oatis)
  
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