May 21, 2020 / 7:23 PM / 4 days ago

TREASURIES-U.S. long-dated prices inch up as market digests supply

    * U.S. Treasury announces 2-year, 5-year, 7-year auctions
    * U.S. TIPS auction show mixed results
    * U.S. yield curve flatter going into month-end

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 21 (Reuters) - U.S. long-dated Treasury prices
inched higher on Thursday in choppy trading, as investors were
relieved that the flood of debt supply from the government to
finance its stimulus programs was absorbed in the market fairly
smoothly.
    That said, the front-end of the curve has been under mild
pressure amid a record $127 billion in supply for U.S. two-year,
five-year, and seven-year notes.
    "The supply, with additional bills, notes, bonds, has all
been well-received overall even though the Federal Reserve has
trimmed its purchases," said Justin Lederer, Treasury analyst,
at Cantor Fitzgerald in New York. 
    Wednesday's auction of $20 billion of U.S. 20-year bonds,
the first such sale since 1986, was considered a success even
though the yield came just a little higher than market
expectations at the bid deadline.
    Analysts also said investor buying going into the month-end
next week also boosted longer-dated Treasury prices. 
    "People usually buy duration toward the month-end extension 
so that brings some flattening bias," said Zhiwei Ren, portfolio
manager, at Penn Mutual Asset Management in Philadelphia.
    "I have been seeing a lot of dealers putting on flatteners
today because the dealers know that fund managers will come and
buy the 30-year to extend duration."
    The yield curve was flatter on Thursday, with the spread
between the 10-year and two-year, as well as the five-year and
30-year, narrowing to 50 basis points, and 105
basis points, respectively.
    On Thursday, the Treaury sold $12 billion in 10-year TIPS
(Treasury Inflation Protected Securities) and the results were
mixed. The note was awarded at a yield of -0.47%, compared with
-0.51% at the bid deadline, suggesting investors demanded a
premium to buy the paper. There was decent demand though from
indirect bidders, which include foreign central banks, taking up
62.1% of bids accepted.
    In afternoon trading, U.S. 10-year yields were
at 0.678% from 0.679% late on Wednesday.
    U.S. 20-year bonds traded at 1.163%, from 1.187%
on Wednesday.
      May 21 Thursday 3:04PM New York / 1904 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1275       0.1297    0.006
 Six-month bills               0.145        0.1471    -0.003
 Two-year note                 99-234/256   0.1694    0.008
 Three-year note               99-188/256   0.2144    0.005
 Five-year note                100-42/256   0.3415    0.012
 Seven-year note               99-220/256   0.5206    0.003
 10-year note                  99-124/256   0.6785    -0.001
 30-year bond                  96-100/256   1.3978    0.000
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50         0.00    
 spread                                               
 U.S. 3-year dollar swap         5.50         0.25    
 spread                                               
 U.S. 5-year dollar swap         3.00         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.50         0.50    
 spread                                               
 U.S. 30-year dollar swap      -46.50         1.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by David
Gregorio and Chizu Nomiyama)
  
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