July 30, 2020 / 6:12 PM / 8 days ago

TREASURIES-Poor economic data, Trump tweet send yields to lowest in months

 (Updates with market activity, jobless claims data, analyst
comment)
    By Ross Kerber
    July 30 (Reuters) - Traders drove U.S. Treasury yields to
their lowest in months on Thursday after data showed the U.S.
economy contracted at its steepest pace in decades and President
Donald Trump tweeted about delaying the Nov. 3 presidential
election. 
    The benchmark 10-year yield was down 3.8 basis
points at 0.5429% in afternoon trading after going as far down
as 0.538%, its lowest since March 9.
    Yields on other Treasuries also fell and the 5-year note
 hit an all-time low of 0.228% as investors sought the
government bonds to protect against economic and political
uncertainty.
     The pattern of the session was set in the morning when the
Commerce Department said gross domestic product fell at a 32.9%
annualized rate in the second quarter, largely in April after
restaurants, bars and factories had to close to slow the spread
of the COVID-19 pandemic. 
    About the same time, the Labor Department said U.S. jobless
claims rose to 1.434 million for the week of July 25, up from
1.422 million in the prior week.
    "People are worried that with the pickup in COVID the
economy is moving backwards a step, and that's what drove them
into the safe haven of bonds," said Andrew Richman, director of
fixed income strategies for Truist/SunTrust Advisory Services.
    Soon after, at 8:46 a.m. EDT, Trump raised the possibility
of delaying the nation's November presidential election. Trump,
without evidence, repeated his claims of mail-in voter fraud and
wrote on Twitter:  "delay the election until people can
properly, securely and safely vote???"
    Together the events turned investors more cautious, with
major U.S. stock indexes lower. The economic data
reinforced the inclination of the Federal Reserve to add to
accommodative policy, while Trump's tweet cast doubt on whether
the U.S. election will be conducted smoothly, market analysts
said. 
    "Certainly President Trump's tweet was read as a negative in
the equity and bond markets. It created a risk-off trade," said
Tom di Galoma, managing director of Seaport Global Holdings.    
    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 42 basis points, about 2 basis points lower
than Wednesday's close and well below its level of 68 basis
points on June 5.
    The yield on the two-year note, seen as an indicator of
inflation expectations, was down less than a basis point at
0.123% in afternoon trading. It reached as low as 0.117% at one
point in the morning, close to its all-time low of 0.105% on May
8.
    
      July 30 Thursday 1:51PM New York / 1751 GMT
                               Price                  
 US T BONDS SEP0               182-8/32     0-31/32   
 10YR TNotes SEP0              140          0-64/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0963    -0.005
 Six-month bills               0.1025       0.1043    -0.008
 Two-year note                 100-1/256    0.123     -0.006
 Three-year note               99-246/256   0.1383    -0.011
 Five-year note                100-24/256   0.2311    -0.022
 Seven-year note               99-208/256   0.4022    -0.032
 10-year note                  100-200/256  0.5429    -0.038
 20-year bond                  102-168/256  0.977     -0.045
 30-year bond                  101-76/256   1.1981    -0.046
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.50        -1.00    
 spread                                               
 U.S. 3-year dollar swap         5.25        -1.00    
 spread                                               
 U.S. 5-year dollar swap         3.75        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -1.00         0.00    
 spread                                               
 U.S. 30-year dollar swap      -41.75         0.00    
 spread                                               
                                                      
 

 (Reporting by Ross Kerber in Boston; Editing by Andrea Ricci
and Jonathan Oatis)
  
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