July 8, 2020 / 2:00 PM / a month ago

TREASURIES-Strong auction demand expected despite rising issuance

    By Ross Kerber
    BOSTON, July 8 (Reuters) - Treasury yields were stable in
trading on Wednesday morning and put the U.S. on track to keep
selling debt at record low yields, analysts expect, indicating
strong demand for the safe securities despite a flood of new
issuance.
    The high yield for an auction of 3-year notes on
Tuesday was 0.19%, the lowest ever, and analysts expect the same
trend on Wednesday when the results of a $29 billion auction of
10-year notes are announced in the early
afternoon.
    To date the lowest high yield for a 10-year auction was 0.7%
on May 12. In trading on Wednesday morning the 10-year yield was
up 1.5 basis points at 0.6627%. 
    "There's a bid for Treasuries as we can see there are
buyers" said Cantor Fitzgerald Treasury analyst Justin Lederer.
The demand indicates investors are willing to look past rising
U.S. deficits, perhaps because the securities still return more
than the debt of other governments, he said. 
    "The market has easily absorbed the additional supply," he
said.
    U.S. stocks inched higher at the open on Wednesday as
investors weighed early signs of an economic rebound against
fears of another lockdown with surging coronavirus cases across
the country.
    Federal Reserve Vice Chairman Richard Clarida on Tuesday
said there is "no limit" on how many Treasuries and other bonds
the U.S. central bank can buy, and added the Fed could ease
policy further with other steps.
    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 50 basis points, about 2 basis points
higher than at its close on Tuesday and near its level since
mid-June.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down less
than a basis point at 0.1626 % in morning trading.
      July 8 Wednesday 9:38AM New York / 1338 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1475       0.15      0.003
 Six-month bills               0.16         0.1624    -0.003
 Two-year note                 99-237/256   0.1626    -0.002
 Three-year note               99-206/256   0.1903    -0.001
 Five-year note                99-194/256   0.2991    0.006
 Seven-year note               100-4/256    0.4977    0.012
 10-year note                  99-164/256   0.6627    0.015
 20-year bond                  99-72/256    1.1656    0.009
 30-year bond                  96-96/256    1.399     0.010
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.75         0.50    
 spread                                               
 U.S. 3-year dollar swap         3.75         0.00    
 spread                                               
 U.S. 5-year dollar swap         2.50         0.00    
 spread                                               
 U.S. 10-year dollar swap       -3.25        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -49.75        -0.25    
 spread                                               
                                                      
    

 (Reporting by Ross Kerber in Boston
Editing by Nick Zieminski)
  
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