July 9, 2020 / 5:44 PM / a month ago

TREASURIES-Yields fall as 30-year bond auction shows strong demand

 (Updates with market activity, auction results)
    By Ross Kerber
    July 9 (Reuters) - U.S. Treasury yields fell on Thursday as
an auction of 30-year bonds showed continued strong demand for
the safe-haven government debt amid the relentless COVID-19
pandemic.
    The Treasury department said it sold $19 billion worth of
30-year bonds at a high yield of 1.33%, a basis point above the
instrument's all-time lowest auction result. 
    It followed the same pattern as two previous auctions this
week in which paper sold at record low yields, as issuance soars
to fund economic stimulus in response to the
coronavirus.
     Primary dealers accounted for 17.4% of accepted bids on
Thursday, compared with an average of 21% according to a
research note from BMO Capital Markets.
    "There's tremendous interest in adding high-quality duration
right now," said Michael Lorizio, senior fixed income trader for
Manulife Investment Management.
    The benchmark 10-year yield was down 3.6 basis
points at 0.6168% in afternoon trading.    
     U.S. stock indexes dropped on Thursday as fears of another
lockdown to contain a surge in coronavirus cases overshadowed
data pointing to a declining trend in weekly jobless claims.
nL4N2EG30T]
    The Labor Department's most timely data on the economy
showed 1.31 million Americans filed for state unemployment
benefits in the latest week, down from 1.43 million claims in
the prior week. It also fared better than economists' estimates
of 1.38 million claims.
    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 46 basis points. That was about four basis
points lower than Wednesday's close and at one point the measure
stood at 45.8 basis points, its lowest since June 12.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down less
than a basis point at 0.1528% in afternoon trading.
    
      July 9 Thursday 1:30PM New York / 1730 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.13         0.1322    -0.015
 Six-month bills               0.1525       0.1547    -0.005
 Two-year note                 99-242/256   0.1528    -0.002
 Three-year note               99-218/256   0.1746    -0.007
 Five-year note                99-218/256   0.2801    -0.011
 Seven-year note               100-62/256   0.4647    -0.024
 10-year note                  100-20/256   0.6168    -0.036
 20-year bond                  100-112/256  1.1004    -0.057
 30-year bond                  98-28/256    1.3269    -0.065
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.00         0.00    
 spread                                               
 U.S. 3-year dollar swap         4.00         0.00    
 spread                                               
 U.S. 5-year dollar swap         2.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.00         1.25    
 spread                                               
 U.S. 30-year dollar swap      -47.50         2.00    
 spread                                               
                                                      
 
    

 (Reporting by Ross Kerber in Boston
Editing by Nick Zieminski and Tom Brown)
  
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