May 6, 2020 / 1:46 PM / a month ago

TREASURIES-Long-dated yields jump as Treasury increases auction sizes

    By Karen Brettell
    NEW YORK, May 6 (Reuters) - Longer-dated Treasury yields
jumped to three-week highs on Wednesday and the yield curve
steepened after the Treasury Department sharply increased the
size of its long-dated debt auctions, as it grapples with
financing its rapidly expanding deficit.
    Treasury said it will launch a long-planned 20-year bond and
increase securities auction sizes across a range of maturities
to raise cash to meet record government borrowing needs caused
by the novel coronavirus outbreak.
    On Monday, the department said it expects to borrow $2.999
trillion during the April-June quarter, five times larger than
the previous single-quarter record set during the 2008 financial
    “Treasury seems to be more comfortable bringing a lot more
long-dated debt to market. They very sharply increased the size
of the five-year and the 30-year, and the size of the 20-year
that they announced is actually quite a bit higher than most
market expectations were looking for,” said Gennadiy Goldberg,
an interest rate strategist at TD Securities in New York.
    The government said it would sell $20 billion in 20-year
bonds. Next week it will sell $42 billion in three-year notes,
$32 billion in 10-year notes, and $22 billion in 30-year bonds.
    That is an increase of $4 billion in three-year notes, $5
billion in 10-year notes and $3 billion in 30-year bonds
compared with its last refunding.
    "It's clear that the Treasury is starting to finance out the
debt faster than most people anticipated," said Jim Vogel, an
interest rate strategist at FHN Financial in Memphis, Tennessee.
    Benchmark 10-year note yields jumped 7 basis
points on the day to 0.725%, the highest since April 15.
Thirty-year bond yields rose 8 basis points to 1.405%, the
highest since April 14.
    The yield curve between two-year and 10-year notes
 steepened to 54 basis points, from 47 basis
points on Tuesday, and the curve between five-year notes and
30-year bonds steepened to 100 basis points, from
96 basis points.
    Investors are also focused on the jobs report for April that
will be released on Friday, which is expected to show massive
job losses after businesses closed to stem the spread of the
    U.S. private employers laid off a record 20.236 million
workers in April, the ADP National Employment Report showed on
    May 6 Wednesday 9:27AM New York / 1327 GMT
 US T BONDS JUN0               178-19/32    -1-22/32  
 10YR TNotes JUN0              138-100/256  -0-120/2  
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             0.11         0.1119    -0.010
 Six-month bills               0.145        0.1475    0.002
 Two-year note                 99-224/256   0.1882    0.002
 Three-year note               99-248/256   0.2607    0.016
 Five-year note                99-228/256   0.3972    0.028
 Seven-year note               99-100/256   0.5892    0.052
 10-year note                  107-76/256   0.7253    0.068
 30-year bond                  114-112/256  1.4049    0.075
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        11.50        -0.75    
 U.S. 3-year dollar swap         6.00        -1.50    
 U.S. 5-year dollar swap         2.75        -1.25    
 U.S. 10-year dollar swap       -3.50        -3.00    
 U.S. 30-year dollar swap      -50.50        -3.25    

 (Reporting by Karen Brettell; Editing by Bernadette Baum)
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