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Bonds News

TREASURIES-Yields rise on vaccine optimism, after weak 20-year auction

 (Adds 20-year auction results, comments, updates prices)
    By Karen Brettell
    NEW YORK, Nov 18 (Reuters) - U.S. Treasury yields rose on
Wednesday on optimism over coronavirus vaccines and after a weak
20-year bond auction dented the appeal of the safe haven debt.
    Pfizer Inc said that final results from the
late-stage trial of its COVID-19 vaccine show it was 95%
effective, adding that it had the required two months of safety
data and would apply for emergency U.S. authorization within
days.
    The U.S. Treasury Department meanwhile saw soft demand for a
$27 billion sale of 20-year bonds, which sent yields to session
highs. 
    “The combination of demand for risk … along with supply has
been weighing, and then today’s really poor auction added a
little bit of pessimism to the outlook,” said Kim Rupert,
managing director of global fixed income analysis at Action
Economics in San Francisco.
    Benchmark 10-year yields rose one basis point to
0.882%. The yields have fallen from an eight-month high of
0.975% last week.
    The yield curve between two-year and 10-year notes
 steepened two basis points to 70 basis points.
    The Treasury will also sell $12 billion in 10-year Treasury
Inflation-Protected Securities (TIPS) on Thursday.
    Investors are balancing the likelihood that a vaccine
rollout will return the economy to normal against what could be
a lengthy timeline to do so. The U.S. government is also
unlikely to launch new fiscal stimulus until at least next year.
    “We're really in an environment where the market is trading
off two distinct narratives. One is we have a vaccine; we'll get
back to normal, buy stocks. The other is because cases are
increasing rather dramatically, we need more from Congress, so
buy bonds," said Ian Lyngen, head of U.S. rates strategy at BMO
Capital Markets in New York.
    The Federal Reserve is expected to increase purchases of
long-dated debt either by shifting more of its existing buys
further out the curve or increasing the overall amount of its
purchase program if yields rise much further from here, which is
likely to cap the yields for the short and intermediate-term.
    “A lot of people are starting to price in the potential the
Fed increases QE either through duration or increased purchases,
so I think for now that might put a lid on the (10-year) note
right around 1%,” said Rupert.
    
      November 18 Wednesday 3:00PM New York / 2000 GMT
                               Price                  
 US T BONDS DEC0               172-15/32    -0-3/32   
 10YR TNotes DEC0              138-44/256   -0-32/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.085        0.0862    0.000
 Six-month bills               0.09         0.0913    -0.005
 Two-year note                 99-231/256   0.1753    0.000
 Three-year note               100-16/256   0.229     0.003
 Five-year note                99-70/256    0.3985    0.012
 Seven-year note               99-4/256     0.6451    0.016
 10-year note                  99-240/256   0.8815    0.010
 20-year bond                  95-56/256    1.4031    0.006
 30-year bond                  100-28/256   1.6204    -0.005
                                                      
   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       -0.50         0.00    
 spread                                               
 U.S. 30-year dollar swap      -32.25         1.00    
 spread (Editing by Marguerita Choy)
  
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