February 25, 2020 / 6:53 PM / a month ago

TREASURIES-Yield on benchmark 10-year Treasury hits record low on virus concerns

 (Updates with market activity, economic data, analyst comment)
    By Ross Kerber
    BOSTON, Feb 25 (Reuters) - The 10-year U.S. Treasury note
hit a record low yield on Tuesday as traders kept up the flight
to safety on concerns the coronavirus epidemic would have a
significant impact on global growth, coupled with soft U.S.
economic data.
    The benchmark 10-year yield was down 5.5 basis
points in afternoon trading at 1.3221%, continuing declines from
Monday and reaching as low as 1.3205% during the session. That
was below its previous all-time low of 1.321% reached on July 6,
2016..
    Major U.S. stock indexes were also down as investors moved
away from riskier assets.
    Dozens of countries have accelerated emergency measures to
curb the spread of the coronavirus, which has killed 2,663 in
China although the World Health Organization (WHO) says the
epidemic there has peaked.
    Even before the epidemic's reach expanded, many traders had
re-evaluated expectations for global growth in 2020, said John
Herrmann, director of U.S. rates strategy for MUFG Securities.
Fears of the outbreak accelerated a decline in yields on
instruments like the 10-year, which had been approaching 2% late
last year, he said.
    "People had started to dial down their expectations. The 
coronavirus just piled onto that as a giant risk-off trend,"
Herrmann said. 
     The Conference Board said its consumer confidence index
ticked up to a reading of 130.7 this month from a downwardly
revised 130.4 in January. But economists polled by Reuters had
forecast it edging up to 132.0 in February. The survey made no
mention of the coronavirus.
    Although the report could be read positively, Jefferies
economist Tom Simons said investors may have been primed to see
the downside. "If you're looking for bad news, you can find it,"
he said.
    While health officials say the coronavirus epidemic has been
declining in China since Feb. 2, it has jumped to about 29 other
countries and territories, with outbreaks in Iran, Italy and
South Korea of particular concern.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 7.2
basis points 1.194% in afternoon trading.
    
      February 25 Tuesday 1:25PM New York / 1825 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.505        1.536     -0.005
 Six-month bills               1.4175       1.4515    -0.028
 Two-year note                 100-88/256   1.194     -0.072
 Three-year note               100-172/256  1.1442    -0.075
 Five-year note                101-24/256   1.1461    -0.072
 Seven-year note               101-184/256  1.2403    -0.064
 10-year note                  101-168/256  1.3221    -0.055
 30-year bond                  104-168/256  1.7983    -0.038
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         1.25         0.50    
 spread                                               
 U.S. 3-year dollar swap         0.50         0.75    
 spread                                               
 U.S. 5-year dollar swap        -0.50         1.50    
 spread                                               
 U.S. 10-year dollar swap       -6.25         1.25    
 spread                                               
 U.S. 30-year dollar swap      -37.50         0.50    
 spread                                               
 
 (Reporting by Ross Kerber; Editing by Tom Brown)
  
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