February 13, 2020 / 2:53 PM / 14 days ago

REFILE-TREASURIES-Yields tick down as traders balance virus, economic reports

 (Corrects typographical error in 7th paragraph to make it
"thousands" instead of "thousand")
    By Ross Kerber
    BOSTON, Feb 13 (Reuters) - U.S. Treasury yields were
slightly lower on Thursday as traders balanced worsening news
about the coronavirus epidemic in China with positive U.S.
economic reports.
    The benchmark 10-year yield was down less than a
basis point in morning trading at 1.619%.
    The trading was part of a broader reaction to a sharp rise
in the number of coronavirus deaths and infections reported in
China, which unnerved world markets on Thursday and halted the
rally in stocks while boosting the prices of government bonds
and gold.
    But positive economic data, such as consumer prices,
prevented yields from falling further, said Andrew Richman,
director of fixed income strategies at SunTrust Advisory
Services, as investors bet against an extreme economic impact
from the epidemic.
    "The U.S. is certainly not in a recession, Europe isn't
getting any worse, and that's balancing out this terrible news
from China," Richman said. As far as the epidemic's eventual
economic impact, "nobody has their arms around this," he said.
    Richman's comments echoed the view of experts, including
several affiliated with the National Association for Business
Economics, who spoke on Tuesday and emphasized the many unknowns
that remain, such as the disease's incubation period and
fatality rates.
    In Hubei province in central China, officials said 242
people died on Wednesday, the biggest daily rise since the
flu-like virus emerged in the provincial capital Wuhan in
December. Total deaths in China were reported at 1,367. The
province recorded thousands more infections, but that appeared
to be largely due to a new counting method.
    Separately, U.S. underlying consumer prices picked up in
January as households paid more for rents and clothing,
supporting the Federal Reserve's contention that inflation would
gradually rise toward its 2% target.
    The Labor Department said on Thursday its consumer price
index, excluding the volatile food and energy components, rose
0.2% last month after edging up 0.1% in December. The so-called
core CPI was up by an unrounded 0.2423% last month.       
    The two-year  U.S. Treasury yield, which
typically moves in step with interest rate expectations, was 
down a basis point at 1.4317% in morning trading.
    
      February 13 Thursday 9:29AM New York / 1429 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5475       1.5794    0.002
 Six-month bills               1.5175       1.5547    -0.002
 Two-year note                 99-228/256   1.4317    -0.010
 Three-year note               99-232/256   1.4071    -0.011
 Five-year note                99-182/256   1.4355    -0.010
 Seven-year note               99-190/256   1.5392    -0.006
 10-year note                  98-232/256   1.619     -0.008
 30-year bond                  106-108/256  2.0842    -0.008
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         4.00         0.00    
 spread                                               
 U.S. 3-year dollar swap         2.75         0.25    
 spread                                               
 U.S. 5-year dollar swap         0.50         0.00    
 spread                                               
 U.S. 10-year dollar swap       -4.50         0.50    
 spread                                               
 U.S. 30-year dollar swap      -32.00         0.25    
 spread                                               
 
 (Reporting by Ross Kerber in Boston; editing by Jonathan Oatis)
  
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