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TREASURIES-Yields move off session low as stocks stabilize

 (Updates with Powell comments, 2-year auction results)
    By Chuck Mikolajczak
    Sept 22 (Reuters) - U.S. Treasury yields moved off earlier
lows on Tuesday, as equities found their footing after a
four-session drop and after comments from U.S. Federal Reserve
Chair Jerome Powell before the House Financial Services
Committee. 
    Yields on the 10-year U.S. Treasury note have drifted lower
the last several sessions as stocks have come under pressure,
with the S&P 500 down 3.5% over the previous four sessions on
concerns about rising coronavirus cases potentially leading to
fresh lockdowns, election uncertainty and Washington gridlock
stalling a new round of pandemic relief.
    With equities under pressure, investors often move into
defensive plays such as Treasuries, driving rates lower. Still,
the yield on the 10-year remained within the 6-basis-point range
it has held since the Fed's most recent policy statement on
Sept. 16.  
    "Overall, we are seeing fixed income markets exude a great
deal of calmness and a calm approach in contrast to what we are
seeing in equities," said Bill Merz, head of fixed income
research at U.S. Bank Wealth Management in Minneapolis.
    "That is during a time when equity markets have experienced
significant volatility, significant downside, and 10-year yields
have done virtually nothing."  
    The yield on 10-year Treasury notes was down 0.2
basis points at 0.669 percent. 
    Powell said the central bank should not be used to funnel
aid for small businesses in need as a result of the coronavirus
pandemic, and Treasury Secretary Steven Mnuchin said he was
willing for the Fed to loosen the standards of the Main Street
program and allow loans as small as $100,000.
    Treasuries had little reaction to economic data which showed
U.S. home sales surged to their highest level in nearly 14 years
in August, as the housing market remains a strength of the
economy.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 0.2
basis points at 0.135 percent. 
    Results from an early afternoon auction of $52 billion of
two-year notes showed soft demand, with primary dealers
accounting for 33.4% of accepted bids, compared to an average of
32.3%, according to a note from BMO Capital Markets rates
strategist Ben Jeffery. 
    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 53.2 basis points, rebounding from a
two-week low of 51.2 hit on Monday.
    

  September 22 Tuesday 2:22PM New York / 1822 GMT
                               Price                  
 US T BONDS DEC0               176-18/32    0-1/32    
 10YR TNotes DEC0              139-152/256  0-8/256   
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0975       0.0989    -0.005
 Six-month bills               0.1075       0.1091    0.000
 Two-year note                 99-251/256   0.1351    -0.002
 Three-year note               99-236/256   0.1513    -0.006
 Five-year note                99-240/256   0.2627    -0.005
 Seven-year note               100-86/256   0.4508    -0.003
 10-year note                  99-148/256   0.6691    -0.002
 20-year bond                  98-148/256   1.2056    -0.002
 30-year bond                  98-220/256   1.422     -0.004
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.00         0.25    
 spread                                               
 U.S. 3-year dollar swap         7.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         6.00         0.00    
 spread                                               
 U.S. 10-year dollar swap        0.75         0.25    
 spread                                               
 U.S. 30-year dollar swap      -36.25         0.50    
 spread (Reporting by Chuck Mikolajczak; editing by Jonathan Oatis and
Sonya Hepinstall)
  
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