March 19, 2020 / 7:33 PM / in 14 days

TREASURIES-Yields fall as investors flee risk while Fed opens taps

 (Updates with market activity)
    By Ross Kerber
    BOSTON, March 19 (Reuters) - U.S. Treasury yields largely
fell in volatile trading on Thursday as investors hurried to
minimize risk in the face of the coronavirus pandemic, and the
Fed poured liquidity into the financial system.
    The yield on the benchmark 10-year U.S. Treasury note
 was at 1.1256%, down 13.2 basis points for the
session.
    The yield on the 3-month U.S. Treasury bill was
up 2.8 basis points to 0.0483%, though still a very low level
for an instrument whose yield has not been in negative territory
since October 2015.
    The movements also steepened a closely watched part of the
U.S. yield curve, the gap between the 2-year and 10-year notes,
 to 69 basis points, adding 6 basis points to its
close on Wednesday and its widest since 2018.
    Analysts said the movements showed investors piling into the
safety of shorter-term securities while taking stock of efforts
by President Donald Trump's administration, the Federal Reserve,
and health authorities to deal with the crisis. 
    "Everyone is trying to digest what impact all this stimulus
will have on Treasuries," said Michael Lorizio, senior fixed
income trader for Manulife Investment Management. 
    "You're seeing rotation trades out of stocks, and on
anything going into fixed income the flows seem overwhelmingly
geared toward the front end of the curve," he said.
    Illiquid markets continued to exacerbate the trading
volatility, analysts said, with the 10-year yield moving across
a 27 basis point range.
    The New York Fed on Thursday morning said it accepted more
than $60 billion in two repurchase agreement operations,
 and announced two additional
operations.
    The Fed also opened the taps for central banks in nine new
countries to access dollars. The Fed said the swaps, in which it
accepts other currencies as collateral in exchange for dollars,
will allow other central banks to tap up to a combined total of
$450 billion.
    Tom Simons, Jefferies money market economist, said the 
accelerating Fed actions would be expected to drive down
Treasury yields, but traders still were trying to reposition
portfolios for safety.
    "Obviously we're headed for a period for the next several
months where the economic data is going to look absolutely
ghastly and there's not going to be a lot of strong risk
appetite," he said.
    Major U.S. stock exchanges were higher in afternoon
trading. Meanwhile a report Thursday morning by the
Labor Department showed the number of Americans filing for
unemployment benefits surged to a 2-1/2 year high last week as
companies in the services sector laid off workers because of the
impacts of the coronavirus. 
    Also on Thursday, the Republican-led U.S. Senate was
scrambling to hammer out details of a $1 trillion-plus package
to stem the economic fallout of the pandemic, which could
include direct financial assistance to Americans, lending to key
industries and money for more medical equipment.
    March 19 Thursday 3:11PM New York / 1911 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0475       0.0483    0.028
 Six-month bills               0.0475       0.0482    -0.028
 Two-year note                 101-79/256   0.4487    -0.081
 Three-year note               99-216/256   0.5528    -0.106
 Five-year note                102-52/256   0.6713    -0.144
 Seven-year note               100-200/256  1.0082    -0.126
 10-year note                  103-128/256  1.1256    -0.132
 30-year bond                  104-184/256  1.7954    -0.099
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        15.50         9.50    
 spread                                               
 U.S. 3-year dollar swap         6.75         8.00    
 spread                                               
 U.S. 5-year dollar swap         6.00         4.25    
 spread                                               
 U.S. 10-year dollar swap      -15.75        -2.00    
 spread                                               
 U.S. 30-year dollar swap      -77.25        -2.75    
 spread                                               
 
    

 (Reporting by Ross Kerber; Editing by Alden Bentley, Will
Dunham and Chris Reese)
  
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