July 7, 2020 / 6:56 PM / a month ago

TREASURIES-Yields drop as coronavirus worries return

 (Adds detail on prices, auction, comment from investors,
previous BOSTON)
    By Noel Randewich and Ross Kerber
    July 7 (Reuters) - U.S. Treasury yields fell on Tuesday as a
worsening COVID-19 caseload aggravated concerns about reopening
businesses too quickly.
    The benchmark 10-year yield was down 3.3 basis
points in afternoon trading at 0.6512%.
    Wall Street's main indexes dipped a day after the benchmark
S&P 500 logged its longest streak of gains this year.

    Treasury yields had risen on Monday, but Tuesday's trading
showed investors remain concerned about the U.S. economic
    "It's today's downturn in the Dow and S&P 500 that is giving
Treasuries a bit of a safe-haven bid," said Kim Rupert, senior
economist at Action Economics in San Francisco. "It's mostly a
COVID bid." 
    On Monday, Florida's greater Miami area became the latest 
coronavirus hot spot to roll back its reopening, ordering
restaurant dining closed, as COVID-19 cases surged nationwide 
and the U.S. death toll topped 130,000.
    Oil prices also fell on Tuesday on concerns a surge in new
virus cases will hamper a recovery in fuel demand.
    The yield on three-year notes was down less than
a basis point at 0.1886% after the U.S. government auctioned $46
billion of them, part of a drastically increased series of debt
auctions to fund trillions of dollars in stimulus aimed at
protecting the economy from the pandemic."
    Non-dealers accounting for 67.6% of bids accepted in the
auction, higher than the average of 62.8% in other auctions and
indicating good demand, said BMO Capital Markets strategist Ben
Jeffery in a note to clients.
    He added the high yield of 0.19% was the lowest at which
three-year notes have been issued, reflecting how yields on all
Treasuries are far below where they stood at the start of 2020.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 49 basis points, about 3 basis points lower
than Monday's close and in line with its level since mid-June.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up less than
a basis point at 0.1626%.
    July 7 Tuesday 2:08 pm New York / 1808 GMT
                                  Price       Yield    Yield
 Three-month bills                0.145       0.1475   -0.008
 Six-month bills                  0.1625      0.1649   -0.002
 Two-year note                    99-237/256  0.1626   0.002
 Three-year note                  100-46/256  0.1886   -0.002
 Five-year note                   99-200/256  0.2943   -0.013
 Seven-year note                  100-20/256  0.4886   -0.022
 10-year note                     99-192/256  0.6512   -0.033
 20-year bond                     99-96/256   1.1603   -0.047
 30-year bond                     96-116/256  1.3957   -0.046
   DOLLAR SWAP SPREADS                                 
                                  Last (bps)  Net      
 U.S. 2-year dollar swap spread     5.50       -0.75   
 U.S. 3-year dollar swap spread     3.75       -0.50   
 U.S. 5-year dollar swap spread     2.50       -0.25   
 U.S. 10-year dollar swap spread   -3.00        0.00   
 U.S. 30-year dollar swap spread  -49.50        0.25   

 (Reporting by Ross Kerber in Boston; Editing by Bernadette Baum
and Alistair Bell)
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