May 7, 2020 / 7:30 PM / 24 days ago

TREASURIES-Yields fall from three-week highs as investors adjust to supply surge

 (Adds details on fed funds futures, quote, updates prices)
    By Karen Brettell
    NEW YORK, May 7 (Reuters) - U.S. Treasury yields fell from
three-week highs on Thursday as investors adjusted to the
prospect of an increase in longer-dated debt supply. 
    A rally in shorter-dated debt also sent two-year yields to
record lows, while federal funds futures began pricing in a
negative U.S. interest rate environment for the first time, a
place the Federal Reserve is determined not to go.
    Long-dated yields jumped and the yield curve steepened on
Wednesday after Treasury said it would launch a long-planned
20-year bond and increase auction sizes across a range of
maturities at a faster pace than expected.
    It was "a lot more longer-dated issuance than we were
expecting, and I think that's why you got the move that we got
yesterday in terms of a steeper yield curve," said Michael
Pugliese, an economist at Wells Fargo in New York.
    That said, "it's not like we saw a couple of hundred basis
point move, so the market was able to digest it," Pugliese said.
    Benchmark 10-year yields fell 8 basis points on
the day to 0.6314%, after reaching 0.7430% on Wednesday, the
highest since April 15.
    The 10-year yields have held in a tight range of between
0.543% and 0.785% since the beginning of April.
    Strong demand for short-dated debt sent two-year yields
 to record lows of 0.1290% while fed fund futures
 began pricing for the possibility of negative rates in
    Some investors may be seeing a much worse outcome for the
coronavirus-led downturn that could force the Fed to get even
more experimental with its crisis response.
    Some analysts said, however, the move was overdone and
likely due to repositioning or a short squeeze.
    "We would expect the Fed to push back against negative rates
in upcoming remarks," analysts at TD Securities said in a
    Fed Chair Jerome Powell and other officials at the U.S.
central bank have said they do not see negative rates as
appropriate in the United States.
    Investors are focusing next on the U.S. jobs report for
April, which is scheduled to be released on Friday. It is
expected to show unprecedented job losses after businesses
closed to stem the spread of COVID-19, the respiratory illness
caused by the novel coronavirus.

      May 7 Thursday 3:00PM New York / 1900 GMT
 US T BONDS JUN0               181-4/32     2-13/32   
 10YR TNotes JUN0              139-76/256   0-192/25  
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             0.1125       0.1144    -0.005
 Six-month bills               0.1375       0.1399    -0.005
 Two-year note                 99-254/256   0.1289    -0.053
 Three-year note               100-50/256   0.1833    -0.064
 Five-year note                100-100/256  0.2959    -0.081
 Seven-year note               100-24/256   0.4863    -0.087
 10-year note                  108-56/256   0.6314    -0.082
 30-year bond                  116-168/256  1.3214    -0.092
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        11.00        -0.25    
 U.S. 3-year dollar swap         5.50        -0.25    
 U.S. 5-year dollar swap         2.75         0.25    
 U.S. 10-year dollar swap       -3.75         0.50    
 U.S. 30-year dollar swap      -50.00         0.75    


 (Editing by Nick Zieminski and Paul Simao)
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below