July 23, 2020 / 9:15 PM / 20 days ago

TREASURIES-Yields fall, record-low auction yield for 10-year TIPS

 (Adds closing yields)
    By Karen Pierog
    CHICAGO, July 23 (Reuters) - U.S. Treasury yields on the
longer end of the yield curve drifted lower on Thursday as
stocks fell and the auction yield for 10-year Treasury-Inflation
Protected Securities (TIPS) hit an all-time low.
    The benchmark 10-year yield ended the U.S.
trading session at 0.5774%, the lowest close since April 21. 
    The $14 billion of 10-year TIPS were sold at -0.930%, the
lowest yield ever in an auction of that security. TIPS yields
are equal to relevant Treasury yields minus expected annual
inflation, making them a market indicator of real interest
rates.
    The bid-to-cover ratio, a metric of overall demand, was
2.24.
    The auction went "pretty well," according to Tom Simons, a
money market economist at Jefferies in New York. "The direct bid
was a little soft, which is not all that unusual in recent
times," he said, noting there was a strong take-down on the
indirect bid side. 
    A rush into TIPS has pushed yields to near historic lows
amid an uptick in inflation expectations. The
10-year TIPS yield was last at -0.881%.
    "With the amount of stimulus that's out there, it's hard to
believe that there's not some inflation that's going to come out
of this," said John Mousseau, president and CEO of Cumberland
Advisors. 
    The latest weekly jobless claims data, which showed initial
claims rising for the first time since late March, did little to
jar the market, which was closely following ongoing talks in
Washington over the next round of aid to combat the economic
fallout from the coronavirus pandemic.
    "We're waiting for more direction on what's going on with
potential stimulus. We get bits and pieces of headlines here and
there that's not helpful for the market finding direction,"
Simons said.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, viewed as an indicator of economic
expectations, closed at 42.57 basis points, the flattest since
April 28. 
    July 23 Thursday 3:55PM New York / 2055 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1175       0.1192    -0.003
 Six-month bills               0.135        0.137     0.005
 Two-year note                 99-242/256   0.1533    0.006
 Three-year note               99-218/256   0.175     0.005
 Five-year note                99-232/256   0.2691    0.000
 Seven-year note               100-108/256  0.4382    -0.009
 10-year note                  100-112/256  0.579     -0.016
 20-year bond                  101-252/256  1.0142    -0.050
 30-year bond                  100-120/256  1.2311    -0.059
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.50        -0.75    
 spread                                               
 U.S. 3-year dollar swap         4.00        -0.75    
 spread                                               
 U.S. 5-year dollar swap         3.25         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.25         0.75    
 spread                                               
 U.S. 30-year dollar swap      -43.25         3.25    
 spread                                               
                                                      
 


 (By Karen Pierog; Editing by Cynthia Osterman and Dan Grebler)
  
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