* U.S. 10-year, 30-year yields hit highest since March * U.S. yield curve steepest since February 2018 * U.S. TIPS yield hits highest since July * U.S. three-year auction shows low indirect bidders (Adds new analyst comments, three-year auction results, update prices) By Gertrude Chavez-Dreyfuss NEW YORK, Nov 9 (Reuters) - U.S. Treasury yields jumped on Monday, as news of a successful late-stage vaccine from Pfizer Inc spurred optimism that the world's largest economy would emerge from a pandemic-induced recession. The benchmark 10-year yield rose to its highest since March, climbing 14 basis points, its biggest one-day jump since March as well. The U.S. yield curve, one indication of risk appetite, hit its steepest level since February 2018, with the spread between 2-year and 10-year notes rising to as high 78.3 basis points. The spread was last at 77 basis points. Pfizer said on Monday its experimental vaccine was more than 90% effective in preventing COVID-19, based on initial data from a large study. The news, potentially a major victory in the fight against a pandemic that has killed over 1 million people and roiled the world economy, sparked a sell-off in safe-haven bond markets in the United States and Europe. "Today's vaccine news provides enormous relief, but the next story chapters are obscure and harder to time," said Jim Vogel, senior rates strategist, at FHN Financial in Memphis. "For the first day of the news, the reaction in the bond market looks appropriate, while equities appear slightly ahead of themselves." Bond yields also benefited from some clarity with last week's U.S. presidential election. Two days after clinching victory over Republican President Donald Trump, Democrat Joe Biden convened a task force on Monday to devise a blueprint for tackling the coronavirus pandemic in the United States. His 13-member task force is headed by former U.S. Surgeon General Vivek Murthy, former Food and Drug Administration Commissioner David Kessler, and Yale University healthcare equity expert Marcella Nunez-Smith. In afternoon trading, U.S. 10-year Treasury yields were last up at 0.954%, from 0.82% late on Friday. It earlier rose to 0.975%, the highest since March. U.S. 30-year yields also touched their highest level since March of 1.767% and last traded up at 1.749%, from Friday's 1.598%. Tom di Galoma, managing director at Seaport Global Holdings, said he favored buying the dip in prices in either the 10-year near 1%, or the 30-year near 1.75%-1.80%. He added that 30-year bonds are "severely oversold at the moment," and expects overseas accounts to buy this "well-timed dip." The yield on U.S. 10-year Treasury Inflation Protected Securities hit -0.743, the highest since July. It was last at -0.77%, compared with -0.831% last Friday. U.S. break-evens, the bond market's gauge of investors' inflation outlook, also rose. The yield spread between 10-year TIPS and 10-year Treasury notes was at 1.725%, the highest level since late October. On Monday, the U.S. Treasury held a record $54 billion three-year note auction, with mixed results. The yield was at 0.25%, lower than the expected rate at the bid deadline. The bid-to-cover ratio was 2.40, below both the 2.44 last month and the 2.44 average. It was the lowest since April but the decline, Action Economics said, was strictly a function of the increased auction volume. Indirect bidders, which include foreign central banks, took just 38.9% of the total, the weakest since May 2019, said Action Economics. It was down sharply from 55.7% in October and the 52.2% average. November 9 Monday 2:50PM New York / 1950 GMT Price Current Net Yield % Change (bps) Three-month bills 0.095 0.0963 0.002 Six-month bills 0.0975 0.0989 -0.002 Two-year note 99-227/256 0.1826 0.028 Three-year note 99-166/256 0.2456 0.043 Five-year note 99-10/256 0.4456 0.083 Seven-year note 98-152/256 0.707 0.111 10-year note 96-236/256 0.9559 0.136 20-year bond 93-76/256 1.5189 0.152 30-year bond 91-84/256 1.75 0.152 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.25 -1.00 spread U.S. 3-year dollar swap 6.50 -1.00 spread U.S. 5-year dollar swap 5.25 -0.75 spread U.S. 10-year dollar swap 1.00 -0.75 spread U.S. 30-year dollar swap -34.25 -1.25 spread (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting Karen Pierog in Chicago; Editing by Nick Zieminski and Bernadette Baum)
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.