May 4, 2020 / 7:31 PM / a month ago

TREASURIES-Yields steady as corporate supply offsets safety bid

 (Adds Treasury borrowing estimates, updates prices)
    By Karen Brettell
    NEW YORK, May 4 (Reuters) - U.S. Treasury yields ended
little changed on Monday, as heavy corporate debt issuance
weighed on prices and brought yields off session lows after an
early round of safe-haven buying.
    Yields fell early on concerns about rising tensions between
China and the United States, which has threatened to retaliate
over the spread of the novel coronavirus.

    But hedging of corporate debt sales brought yields off their
lows.
    "We’re seeing some slightly upward pressure on Treasury
yields today," said Jon Hill, an interest rate strategist at BMO
Capital Markets in New York. 
    Benchmark 10-year note yields were last 0.64%,
unchanged from Friday. The yields have held in a tight band
between 0.543% and 0.785% for the past month.
    "To me that really speaks to there is a deep lack of
conviction over what comes next," Hill said.
    The U.S. Treasury Department on Monday said it plans to
borrow nearly $3 trillion in the second quarter of 2020 - a
record for any quarter - as the federal government contends with
the impact of the coronavirus.
    Additional details of Treasury's quarterly refunding will be
announced at 08:30 a.m (1230 GMT) on Wednesday. 
    The government faces a $4 trillion deficit as it launches
stimulus to try to blunt the economic impact of business
shutdowns.
    The government has so far relied heavily on Treasury bill
issuance to finance its spending needs, but it has also begun to
increase the size of its coupon-bearing auctions. 
    This process is expected to continue. In February, Treasury
also said it would announce details of a planned new 20-year
bond in May.
    Uncertainty around when the United States economy will
return to normal makes it difficult to project how much debt
will ultimately be needed going forward.
    “We could see deficits blow out once again if all these
reopenings fail, or it could go fine and some of the funding
needs might not be as dire as expected. There are huge error
bands around these estimates,” Hill said.
    
May 4 Monday 3:11PM New York / 1911 GMT
                               Price                  
 US T BONDS JUN0               180-21/32    0         
 10YR TNotes JUN0              138-244/256  0-20/256  
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             0.105        0.1068    -0.002
 Six-month bills               0.1175       0.1192    -0.003
 Two-year note                 99-227/256   0.1822    -0.020
 Three-year note               100-8/256    0.2393    -0.019
 Five-year note                100-18/256   0.3608    -0.008
 Seven-year note               99-208/256   0.5274    -0.006
 10-year note                  108-36/256   0.64      0.000
 30-year bond                  117-72/256   1.2984    0.020
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        12.75         0.00    
 spread                                               
 U.S. 3-year dollar swap         7.75         0.00    
 spread                                               
 U.S. 5-year dollar swap         4.00         0.00    
 spread                                               
 U.S. 10-year dollar swap       -0.75        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -47.50        -1.25    
 spread                                               
 
 (Editing by David Gregorio)
  
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