March 13, 2020 / 6:47 PM / in 23 days

TREASURIES-U.S. Treasury yields rise as volatility fuels illiquidity

 (Updates yields, adds launch of Fed purchases, analyst comment)
    By Karen Pierog
    CHICAGO, March 13 - U.S. Treasury yields rose on Friday as
liquidity remained a problem in the volatile market, even after
the New York Federal Reserve said it would make a massive amount
of cash available in an effort to calm jitters as the
coronavirus spreads. 
    The 10-year note yield was last at 0.952%, up
from 0.852% at Thursday's close.
    Justin Hoogendoorn, head of fixed income strategy and
analytics at Piper Sandler in Chicago, said there were "very
little bids" in the market.
    "It really does scream volatility, scream that there's a
lack of liquidity in the marketplace," he said.
    The New York Fed said on Thursday it would make $1.5
trillion available in repurchase agreement (repo) loans and that
it would start purchasing a broader range of U.S. Treasury
securities than it has been of late, a shift that signals the
Fed could deploy some of its crisis-era tools sooner than
planned.
    It saw relatively low takeup of the new loans, however. 
Banks borrowed $17 billion at a three-month repo operation on
Friday, and $78.4 billion at a three-month operation on
Thursday. They also took only $24.1 billion in one-month loans
on Friday.
    As for purchases, $37 billion was targeted for five
maturities on Friday, according to the NY Fed.
    Robert Tipp, chief investment strategist and head of global
bonds at PGIM Fixed Income in Newark, said the Fed moves were
helping although the market was still thin and volatile. 
    Yields on 30-year bonds on Friday jumped to an
overnight high of 1.87%, before dropping back down to 1.41% in
the morning New York trading session, an unusually large move.
In afternoon trading, the yield stood at 1.564% up from
Thursday's close of 1.411%.
    Tipp said markets were banking on a sizable rate cut when
the Fed meets at its regular monetary policy meeting next week. 
     "It's pretty fragile out there," he said. "The markets are
not going to know for some time what's going to be the depth of
these fundamental shocks on the economy."
    With global stock markets bouncing off their lows, Wall
Street opened higher a day after its worst session since 1987.

    Two-year Treasury yields were trading at 0.476%.
    
      March 13 Friday 2:34PM New York / 1834 GMT
    
    
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             0.2675       0.2721    -0.055
 Six-month bills               0.355        0.3616    0.004
 Two-year note                 101-67/256   0.4763    -0.013
 Three-year note               99-192/256   0.5843    0.000
 Five-year note                102-30/256   0.6898    0.038
 Seven-year note               101-146/256  0.8917    0.097
 10-year note                  105-44/256   0.9522    0.100
 30-year bond                  110-96/256   1.5644    0.153
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         2.25         4.75    
 spread                                               
 U.S. 3-year dollar swap        -1.00         5.75    
 spread                                               
 U.S. 5-year dollar swap         4.50         3.00    
 spread                                               
 U.S. 10-year dollar swap       -0.75         2.25    
 spread                                               
 U.S. 30-year dollar swap      -62.25        -2.00    
 spread                                               
 

    

 (By Karen Pierog in Chicago and Karen Brettell in New York;
Editing by David Gregorio and Tom Brown)
  
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