May 6, 2020 / 7:36 PM / 23 days ago

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

 (New throughout, updates prices, market activity and comments)
    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 to help finance 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 measures to fight the novel coronavirus outbreak and mitigate
economic damage.
    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
crisis.
    “Treasury seems to be more comfortable bringing a lot more
long-dated debt to market," said Gennadiy Goldberg, an interest
rate strategist at TD Securities in New York, adding that "the
size of the 20-year that they announced is actually quite a bit
higher than most market expectations were looking for.”
    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.
    Treasury has concentrated the bulk of its increased issuance
in short-term Treasury bills, but analysts have said that it
will need to increase longer-dated maturities over time.
    It was, however, expected to take longer to push out the
debt maturities than was announced on Wednesday.
    "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 6 basis
points on the day to 0.714%, after earlier reaching 0.743%, the
highest since April 15. Thirty-year bond yields rose
9 basis points to 1.420%, after getting as high as 1.446%, the
highest since March 26.
    The yield curve between two-year and 10-year notes
 steepened to 53 basis points, from 47 basis
points on Tuesday, and the curve between five-year notes and
30-year bonds steepened to 104 basis points, from
96 basis points.
    Investors are also focused on the jobs report for April due
on Friday, which is expected to show massive job losses.
    U.S. private employers laid off a record 20.236 million
workers in April, the ADP National Employment Report showed on
Wednesday. 
    
May 6 Wednesday 3:02PM New York / 1902 GMT
                               Price                  
 US T BONDS JUN0               178-20/32    -1-21/32  
 10YR TNotes JUN0              138-136/256  -0-84/25  
                                            6         
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             0.1175       0.1195    -0.003
 Six-month bills               0.1425       0.145     0.000
 Two-year note                 99-228/256   0.1803    -0.006
 Three-year note               100-2/256    0.2473    0.002
 Five-year note                99-254/256   0.3766    0.008
 Seven-year note               99-124/256   0.5755    0.039
 10-year note                  107-104/256  0.7142    0.057
 30-year bond                  114-12/256   1.4198    0.090
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        11.25        -1.00    
 spread                                               
 U.S. 3-year dollar swap         6.00        -1.50    
 spread                                               
 U.S. 5-year dollar swap         2.50        -1.50    
 spread                                               
 U.S. 10-year dollar swap       -4.25        -3.75    
 spread                                               
 U.S. 30-year dollar swap      -50.75        -3.50    
 spread                                               
 
 (Additional reporting by Gertrude Chavez; Editing by Bernadette
Baum and David Gregorio)
  
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