May 15, 2020 / 1:55 PM / 13 days ago

TREASURIES-Yields tick down on U.S. retail sales collapse, unclear outlook

    By Ross Kerber
    BOSTON, May 15 (Reuters) - U.S. Treasury yields dipped on
Friday as investors bought government debt after a shockingly
weak retail sales report and questions about whether public
health steps had made the economy ready to reopen. 
    The benchmark 10-year yield was down 1.3 basis
points in morning trading at 0.6056%.
    The Commerce Department said retail sales plunged 16.4% last
month as the novel coronavirus pandemic kept Americans at home
and put the economy on track for its biggest contraction in the
second quarter since the Great Depression.
    Yet the report was only the latest piece of grim economic
news to spark only a modest bond market reaction, just as on
Thursday a report of another 3 million jobs lost left the yield
on the 10-year note unchanged.
    The dynamic showed bond market investors are more focused on
the pace of future economic gains, said Guy LeBas, chief fixed
income strategist at Janney Montgomery Scott. Meanwhile poor
numbers don't fit into any conventional model.
    "There's no forecasting framework for an economic shut-in of
this magnitude," he said. 
    While auctions of 10-year notes and 30-year bonds adding
supply this week might typically drive up yields, he said,  a 
Treasury auction of a new 20-year bond on May 20 may have a
greater impact.
    Major Wall Street indexes opened lower amid growing trade
tensions between Washington and Beijing.
    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 46 basis points, within a basis point of
Thursday's close.
    The two-year  U.S. Treasury yield, which
typically moves in step with interest rate expectations, was
down less than a basis point at 0.141%.
       
      May 15 Friday 9:32AM New York / 1332 GMT
                               Price                  
 US T BONDS JUN0               182-2/32     0-14/32   
 10YR TNotes JUN0              139-136/256  0-28/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.12         0.122     0.000
 Six-month bills               0.1475       0.1497    -0.002
 Two-year note                 99-248/256   0.141     -0.008
 Three-year note               99-214/256   0.18      -0.010
 Five-year note                100-104/256  0.2923    -0.008
 Seven-year note               100-64/256   0.4634    -0.012
 10-year note                  100-48/256   0.6056    -0.013
 30-year bond                  99-136/256   1.2688    -0.027
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        10.00        -0.25    
 spread                                               
 U.S. 3-year dollar swap         6.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         3.25         0.50    
 spread                                               
 U.S. 10-year dollar swap       -2.25         1.25    
 spread                                               
 U.S. 30-year dollar swap      -46.50         1.75    
 spread                                               
 
 (Reporting by Ross Kerber in Boston; Editing by David Gregorio)
  
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