January 27, 2020 / 2:17 PM / in a month

TREASURIES-Yields drop to three-month lows on coronavirus concerns

    * Coronavirus fears boost safety buying of Treasuries
    * Treasury to sell $40 bln 2-year notes, $41 bln 5-yr notes
    * Fed expected to leave rates unchanged on Wednesday

    By Karen Brettell
    NEW YORK, Jan 27 (Reuters) - Benchmark U.S. Treasury yields
fell to three-month lows on Monday as concerns grew about the
economic impact of China’s spreading coronavirus, even as the
Treasury Department prepared to sell $81 billion in
coupon-bearing supply.
    The death toll from the coronavirus outbreak in China rose
to 81 and the virus spread to more than 10 countries, including
France, Japan and the United States. Some health experts
questioned whether China can contain the epidemic.
    “We’ve seen selling in equities, buying in safe havens. The
news story is certainly about the coronavirus,” said Guy LeBas,
chief fixed income strategist at Janney Montgomery Scott in
    “There is clearly going to be some economic impact,
particularly as its coming at a major consumer holiday. It’s too
early to assess what that might be or how it flows through to
other economies, but China’s growth impulse is an extremely
important one for the global economy,” LeBas said.
    Benchmark 10-year note yields fell to 1.625%,
from 1.680% late on Friday. The yields reached 1.604% overnight,
which was the lowest since Oct. 10.
    The yield curve between two-year and 10-year notes
 also flattened to 17 basis points, the flattest
since Dec 11.
    The safety bid comes before the Treasury Department will
sell $40 billion in two-year notes and $41 billion in five-year
notes on Monday. It will also sell $32 billion in seven-year
notes on Tuesday.
    The Federal Reserve is expected to leave rates unchanged
when it concludes its two-day meeting on Wednesday.
      January 27 Monday 9:00AM New York / 1400 GMT
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             1.495        1.5254    -0.006
 Six-month bills               1.4925       1.5286    -0.010
 Two-year note                 100-84/256   1.4512    -0.035
 Three-year note               100-56/256   1.4243    -0.046
 Five-year note                101-110/256  1.448     -0.053
 Seven-year note               101-96/256   1.5398    -0.059
 10-year note                  101-32/256   1.6252    -0.055
 30-year bond                  106-132/256  2.0804    -0.048
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         4.50        -1.25    
 U.S. 3-year dollar swap         1.75        -1.25    
 U.S. 5-year dollar swap        -1.00        -1.00    
 U.S. 10-year dollar swap       -6.50        -0.50    
 U.S. 30-year dollar swap      -32.75        -0.75    
 (Reporting by Karen Brettell; editing by Jonathan Oatis)
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