May 18, 2020 / 3:25 PM / 15 days ago

TREASURIES-U.S. yields rise on optimism about coronavirus vaccine

    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 18 (Reuters) - U.S. Treasury yields rose on
Monday, as investors grew optimistic about a potential vaccine
that could help fight the coronavirus pandemic, boosting overall
risk appetite as stocks and oil gained.
    The upcoming supply of U.S. 20-year bonds also weighed on
long-dated Treasury prices.
    U.S. two-year, 10-year, and 30-year yields climbed to
one-week highs, while the yield curve steepened.
    "We're having a sell-off in Treasuries because on the macro
front here, we have more good news on the coronavirus," said
Stan Shipley, fixed-income strategist, at Evercore ISI in New
York.
    "Death count is going down, and the new cases are coming
down as well and there is some positive news on the vaccine," he
added.
    Moderna Inc said on Monday its experimental
COVID-19 vaccine showed promise in a small early-stage trial,
with the vaccine producing virus-neutralizing antibodies similar
to those found in recovered patients.
    No approved treatment or vaccine is available for COVID-19,
the pulmonary disease caused by the novel coronavirus, and
experts predict a safe and effective vaccine could take 12-18
months to develop. 
    U.S. President Donald Trump on Friday expressed hope that a
vaccine would be in place before the end of the year, and said
his administration would mobilize its forces to get a vaccine
distributed. [nL1N2CX1NF
    In late morning trading, U.S. 10-year yields
rose to 0.688% from 0.64% late on Friday, after rising earlier
to 0.692%, a one-week high.
    Yields on U.S. 30-year bonds were at 1.395%, up
from 1.32% on Friday. Earlier, 30-year yields rose to a one-week
peak of 1.401%.
    On the short end of the curve, U.S. two-year yields were
last at 0.177%, up from Friday's 0.149%, hitting a one-week high
as well of 0.179%.
    The yield curve steepened for a second straight day on
Monday, with the spread between the 10-year and two-year
widening to as much 52.4 basis points, from 49.60
basis points on Friday.
    The curve has steepened since the beginning of the pandemic,
as investors have piled into short-term debt, having ruled out
rate hikes in the immediate future.
    Investors are also bracing for the $20 billion U.S. 20-year
bond auction on Wednesday. The last time a 20-year bond was sold
was more than three decades ago.
    
      May 18 Monday 11:02AM New York / 1502 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.12         0.122     -0.002
 Six-month bills               0.155        0.1573    0.005
 Two-year note                 99-229/256   0.1793    0.030
 Three-year note               99-182/256   0.2221    0.034
 Five-year note                100-32/256   0.3495    0.042
 Seven-year note               99-192/256   0.5367    0.051
 10-year note                  99-72/256    0.6996    0.060
 30-year bond                  96-40/256    1.4076    0.088
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.00        -0.75    
 spread                                               
 U.S. 3-year dollar swap         5.50        -0.75    
 spread                                               
 U.S. 5-year dollar swap         3.50        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -47.50        -0.25    
 spread                                               
 

 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Richard
Chang)
  
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