January 23, 2020 / 3:41 PM / 25 days ago

TREASURIES-U.S. yields tumble on nagging worries about new virus

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 23 (Reuters) - U.S. Treasury prices surged on
Thursday, pushing yields to multi-week lows, boosted by
safe-haven demand on persistent concerns about the impact of the
latest coronavirus, which recently broke out in China.
    U.S. 30-year yields dropped to a seven-week low, while those
on two-year and 10-year notes fell to fresh two-week lows.
    The latest virus has killed 17 people and infected more than
630, as China placed millions of people on lockdown on Thursday
in two cities at the epicenter of the outbreak.
    The virus has also spread to many parts of Asia, with
Vietnam, Singapore, South Korea, Thailand, and Japan reporting
cases of the disease. The United States has also reported one
case.  
    The virus strain is said to have come late last year from
illegally traded wildlife at an animal market in the central
Chinese city of Wuhan.
    "The coronavirus is front and center," said Tom di Galoma,
managing director at Seaport Global Holdings in New York.
    "With the Chinese New Year starting and a lot of these
celebrations being canceled, I think there is a lot of risk-off
trade taking place. There's also a lot of short-covering going
on ahead of Asia being out next week."
    Also on Thursday, European Central Bank President Christine
Lagarde spoke after the bank launched a broad review of its
policy because the bank has fallen short of its inflation target
of just under 2% for years despite implementing aggressive
stimulus measures. The ECB also left its policy rates
unchanged.
    Lagarde further struck a dovish tone at her news conference.
"Monetary policy has to remain highly accommodative for a
prolonged period of time to support underlying inflation
pressures and headline inflation developments over the medium
term," she said.
    Germany's 10-year bond yield fell after her remarks, which
was last at -0.299%. Lagarde's comments also weighed
slightly on Treasury yields. 
    "The ECB meeting did come as a dovish surprise following the
upbeat tone seen in the December minutes," TD Securities said in
a research note. "That said, markets are still reluctant to
price any policy cuts from the ECB in 2020."
    In morning trading, U.S. 10-year yields fell to 
1.73%, from 1.771% late on Wednesday. Earlier in the session,
10-year yields fell to two-week lows of 1.72%.
    Yields on U.S. 30-year bonds were at 2.179%,
down from 2.219% on Wednesday. Thirty-year yields earlier fell
to seven-week troughs of 2.172%.
    On the short end of the curve, U.S. two-year yields fell to
two-week lows of 1.489% from Wednesday's 1.526%. They
were last at 1.497%.
    
      January 23 Thursday 10:28 AM New York / 1528 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5175       1.5487    -0.005
 Six-month bills               1.515        1.5521    -0.008
 Two-year note                 100-62/256   1.4973    -0.029
 Three-year note               100-2/256    1.4973    -0.030
 Five-year note                100-254/256  1.5403    -0.035
 Seven-year note               100-168/256  1.6494    -0.039
 10-year note                  100-44/256   1.7308    -0.040
 30-year bond                  104-64/256   2.1803    -0.039
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.75        -0.25    
 spread                                               
 U.S. 3-year dollar swap         3.50        -0.50    
 spread                                               
 U.S. 5-year dollar swap         0.50        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -5.25        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -31.75        -0.75    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan
Oatis)
  
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