March 20, 2020 / 7:04 PM / 20 days ago

TREASURIES-Yields decline after governor orders New York residents to stay home

 (Updates with market activity, analyst comment)
    By Ross Kerber
    BOSTON, March 20 (Reuters) - U.S. Treasury yields fell on
Friday as New York ordered residents to stay at home,
reinforcing concerns about the economic impact of the
coronavirus pandemic, and the Federal Reserve stepped in with
measures aimed at boosting liquidity.
    The yield on the benchmark 10-year note was down
16.6 basis points at 0.9625%, continuing volatility seen this
week, swinging in a range of 36 basis points during the day.
    The movement left a closely watched part of the U.S. yield
curve, the gap between the 2-year and 10-year notes,
 at 59 basis points, 5 basis points lower than its
close on Thursday but still at a level not seen since 2018.
    One reason for the afternoon treasury buying, analysts said,
came when New York Governor Andrew Cuomo told a news conference
he would issue an executive order to mandate that 100% of the
non-essential workforce stay home and all non-essential
businesses close.
    California also ordered nearly 40 million people to stay
    Zhiwei Ren, managing director and portfolio manager for   
Penn Mutual Asset Management, said the stay-at-home orders
likely were seen as disruptive by keeping financial teams apart.
    He said other developments likely played a role in lowering
yields, such as an announcement by the New York Fed that it
would offer $1 trillion for daily repurchase agreement
operations for the rest of the month. 
    Plus, continued illiquidity could be magnifying the impact
of a few orders, Ren said, magnifying the movement of
    "It doesn't feel like a risk-off flight," Ren said of
Friday's price movements.
    The New York Fed on Friday accepted a total of $67 billion
in bids in repurchase agreement operations, according to its
    Andrew Richman, managing director of fixed income at
Truist/SunTrust Advisory Services, said while various actions by
the Fed and other parts of the U.S. government seemed to be
keeping the financial system liquid there was little cause for
short-term optimism. 
    The yield on the short-term 3-month Treasury bill
remained close to zero and he and others said that while the
10-year yield was higher than last week, it was still at a
relatively low level.
    Together, the numbers are "telling us that we'll have
negative growth and the Fed will be at virtually zero for a long
time," Richman said.
    March 20 Friday 2:54PM New York / 1854 GMT
                               Price        Current   Net
                                            Yield %   Change
 Two-year note                 101-122/256  0.3595    -0.062
 Three-year note               100-62/256   0.4181    -0.111
 Five-year note                102-232/256  0.5279    -0.126
 Seven-year note               102          0.8277    -0.163
 10-year note                  105-16/256   0.9625    -0.166
 30-year bond                  109-168/256  1.5928    -0.158
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        16.00        -1.50    
 U.S. 3-year dollar swap        10.25         1.75    
 U.S. 5-year dollar swap         5.75        -0.25    
 U.S. 10-year dollar swap      -14.25         1.25    
 U.S. 30-year dollar swap      !Empty       !Empty    
 spread                        value        value     

 (Reporting by Ross Kerber; Editing by Will Dunham, Alden
Bentley, David Gregorio and Dan Grebler)
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