March 19, 2020 / 4:42 PM / 20 days ago

TREASURIES-Yields fall in choppy session as investors puzzle out government coronavirus actions

 (Recasts and updates with market activity, adds analyst
comment)
    By Ross Kerber
    BOSTON, March 19 (Reuters) - U.S. Treasury yields largely
fell in volatile trading on Thursday as investors grappled with
official responses to coronavirus to understand their impact on
government debt, while a surge in weekly jobless claims
reinforced concerns about the pandemic’s impact on economic
growth.
    The trading also showed investors hurrying to minimize risk
even as the Fed poured liquidity into the financial system,
analysts said.
    The yield on the benchmark 10-year U.S. Treasury note
 was at 1.1354%, down 12.3 basis points for the
session.
    The yield on the 3-month U.S. Treasury bill was
up 4.1 basis points to 0.061%, though still a very low level for
an instrument whose yield has not been in negative territory
since October 2015.
    The movements left an important part of the U.S. yield
curve, the gap between the 10 year note and the 3-month bill, at
more than a percentage point. While that level was about 8 basis
points off its high for the session it was still the widest
since 2018.
    Analysts said the movements showed investors piling into the
short-term security as a safety play while taking stock of
various new initiatives 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.
    The New York Fed on Thursday morning said it accepted more
than $60 billion in two repurchase agreement
operations.
    The central bank also said it would conduct an additional
$10 billion in purchases across two separate operations for
settlement on March 23.
    The Fed 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 for at least the next six months allow other central banks
to tap up to a combined total of $450 billion to back up the
world's dollar-dependent financial system.
    Tom Simons, Jefferies money market economist, said the 
accelerating Fed actions would be expected to drive down
Treasury yields. But taken together Thursday's trading suggested
 investors are still trying to reposition portfolios.
    "There are still some investors who had big losses who are
de-leveraging and trying to raise cash," he said. 
    "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 lower. 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. 
    U.S. Treasury Secretary Steven Mnuchin urged Congress to
move quickly to pass a $1 trillion economic relief measure by
early next week, saying he expects bipartisan support for the
bill to get cash payments to Americans during the
crisis.
 March 19 Thursday 12:05PM New York / 1605 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.06         0.061     0.041
 Six-month bills               0.0475       0.0482    -0.028
 Two-year note                 101-91/256   0.4247    -0.105
 Three-year note               99-240/256   0.5211    -0.138
 Five-year note                102-82/256   0.6475    -0.168
 Seven-year note               100-244/256  0.9827    -0.151
 10-year note                  103-104/256  1.1354    -0.123
 30-year bond                  104-112/256  1.8072    -0.087
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.00        13.00    
 spread                                               
 U.S. 3-year dollar swap        10.00        11.25    
 spread                                               
 U.S. 5-year dollar swap         6.75         5.00    
 spread                                               
 U.S. 10-year dollar swap      -14.75        -1.00    
 spread                                               
 U.S. 30-year dollar swap      -80.75        -6.25    
 spread                                               
 
 (Reporting by Ross Kerber; Editing by Will Dunham and Chris
Reese)
  
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