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TREASURIES-U.S. yields edge higher in choppy trading as market consolidates

    * U.S. 10-year note auction shows softer underlying metrics
    * U.S. yield curve steeper, spread widest in more than 2
years
    * Markets starting to re-price for higher U.S. yields

 (Adds comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 10 (Reuters) - U.S. Treasury yields rose
modestly on Tuesday, as the market consolidated the previous
session's strong gains fueled by news of a potential coronavirus
vaccine.
    For some analysts, the trend seems to be toward higher
yields on the vaccine news and growing optimism about a stable
U.S. recovery.
    The U.S yield curve, one gauge of risk appetite, steepened
again on Tuesday, with the spread between two-year and 10-year
notes rising as high as 78.5 basis points, the
widest since February 2018.
    On Monday, Pfizer Inc said its experimental vaccine
was more than 90% effective in preventing COVID-19 based on
initial data from a large study. That pushed 10-year and 30-year
yields to eight-month highs on Monday, and two-year and 20-year
yields to five-month peaks.
    "Is it too soon to judge this trend (for higher yields), as
the vaccine is likely not available to most people until the
middle of next year?" said Patrick Leary, chief market
strategist and senior trader at broker-dealer Incapital.
    "Long term, the trend should continue. But if we see 1.25%
in the 10-year and we're still in this same wait-and-see mode
and the economy is still sputtering dealing with COVID, you'll
see the Federal Reserve talk yields lower, if not shift their
purchases out the curve more," he added.
    Politics, meanwhile, has taken a back seat for now in terms
of the market's focus, with Democrat Joe Biden on Saturday
securing more than the 270 votes in the Electoral College needed
to become U.S. president.
    Moody's Investors Service, in a note on Tuesday, warned
however, that ongoing legal challenges to Biden's projected
victory by Republican incumbent Donald Trump could unsettle
markets and stir social tensions, which could have a material
impact on the U.S. recovery.
    In late afternoon trading, U.S. 10-year Treasury yields
edged up to 0.969% from 0.958% late on Monday. They
hit 0.975% on Monday, the highest since March.
    U.S. 30-year yields were little changed were up at 1.758%
, from Monday's 1.751%. They touched 1.767% on
Monday, the highest level since March.
    On the front end of the curve, U.S. two-year yields inched
up to 0.184%, from 0.183% on Monday, hitting their
strongest level since June of 0.189% on Monday as well.
    Leslie Falconio, senior fixed income strategist at UBS
Global Wealth Management, cautioned against further pushing
rates higher.
    "As we head into winter months, with the potential of rising
COVID-19 fears and a long road ahead on the approval and
widespread dissemination of a vaccine, we expect investors to
start adding 10-year Treasury near the upper end of the range
for short-term protection," Falconio said in a research note.
    Tuesday's Treasury's auction of $41 bln in 10-year notes
showed lackluster demand.
    The high yield of 0.96% was in line with market
expectations. But the bid-to-cover ratio, a gauge of demand, was
a tad softer at 2.32, compared with an average of 2.42. Indirect
bidders, which include foreign central banks, took 54.8% of the
total, compared with an average of 61.1%.
    
      November 10 Tuesday 3:03PM New York / 2003 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             !Empty       !Empty    !Empty
                               value        value     value
 Six-month bills               !Empty       !Empty    !Empty
                               value        value     value
 Two-year note                 99-226/256   0.1847    0.002
 Three-year note               99-250/256   0.2578    0.005
 Five-year note                98-248/256   0.4602    0.013
 Seven-year note               98-120/256   0.7258    0.017
 10-year note                  96-200/256   0.9715    0.013
 20-year bond                  93-32/256    1.5295    0.010
 30-year bond                  91-28/256    1.7601    0.009
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.75         0.50    
 spread                                               
 U.S. 3-year dollar swap         6.00        -0.50    
 spread                                               
 U.S. 5-year dollar swap         5.25         0.00    
 spread                                               
 U.S. 10-year dollar swap        0.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -34.50        -0.25    
 spread (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Ross Kerber in Boston; Editing by Nick Zieminski and Richard
Chang)
  
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