June 23, 2020 / 6:27 PM / 13 days ago

TREASURIES-Longer-term yields higher on economic recovery signs

 (Updates with trading activity, analyst comment, economic data
and auction result)
    By Ross Kerber and Chuck Mikolajczak
    June 23 (Reuters) - Longer-term U.S. Treasury yields ticked
higher on Tuesday as positive economic reports raised hopes of a
swift recovery despite the continued COVID-19 pandemic.
    The benchmark 10-year yield was up less than a
basis point in afternoon trading at 0.7102%.
    The activity mirrored equities trading, with Wall Street's
main indexes higher. White House trade adviser Peter Navarro
walked back on his earlier remarks that the U.S.-China trade
pact was "over", which had stoked market volatility.

    "The price action reflects an equilibrium between a Fed that
can still do more on rates if it wanted and an economy that is
starting to get back on its feet," said BMO Capital Markets
rates strategist Ben Jeffery.
    Sales of new U.S. single-family homes increased 16.6% in
May, more than expected, to a seasonally adjusted annual rate of
676,000 units.
    Also the pace of contraction in the U.S. manufacturing and
services sectors slowed in June as businesses
    Non-dealer bids were accepted for 69% of an auction of
two-year notes, according to results posted by the U.S. Treasury
Department on Tuesday afternoon, higher than the average of
66.4%, according to BMO, and indicating solid demand.
    Jim Barnes, director of fixed income at Bryn Mawr Trust,
said Tuesday's trading suggested investors were more focused on
the economy than on public health news.
    "The market is starting to trade a little bit on some of
those factors that were influencing the markets before COVID-19,
some of the geopolitical issues (and) trade issues," he said
    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 52 basis points, about a basis point higher
than Monday's close.        
    The two-year  U.S. Treasury yield, which
typically moves in step with interest rate expectations, was
unchanged at 0.1918%.
      June 23 Tuesday 2:11PM New York / 1811 GMT
 US T BONDS SEP0               176-31/32    -0-10/32  
 10YR TNotes SEP0              138-180/256  0         
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.15         0.1521    -0.008
 Six-month bills               0.1725       0.175     -0.003
 Two-year note                 99-223/256   0.1918    0.000
 Three-year note               100-24/256   0.2184    -0.006
 Five-year note                99-160/256   0.3267    -0.008
 Seven-year note               99-192/256   0.5368    0.000
 10-year note                  99-48/256    0.7102    0.006
 20-year bond                  97-232/256   1.2441    0.016
 30-year bond                  94-100/256   1.483     0.021
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         6.00         0.00    
 U.S. 3-year dollar swap         4.25         0.25    
 U.S. 5-year dollar swap         3.75         0.25    
 U.S. 10-year dollar swap       -1.75         0.00    
 U.S. 30-year dollar swap      -49.25         0.25    

 (Reporting by Ross Kerber in Boston and by Chuck Mikolajczak in
New York
Editing by Nick Zieminski and Sonya Hepinstall)
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