May 15, 2020 / 6:16 PM / 15 days ago

TREASURIES-Yields click higher as investors look for reopening progress

 (Updates market movements; adds analyst comment)
    By Ross Kerber
    May 15 (Reuters) - U.S. Treasury yields were slightly higher
on Friday as investors looked for signs that public health steps
have readied the economy to reopen. 
    The benchmark 10-year yield was up 2.5 basis
points to 0.6444%, putting it close to the middle of the note's
range all week and pointing to investors' faith in the
government bonds despite a stream of negative economic reports,
said Kim Rupert, senior economist for Action Economics
    "We know the data is bad, so when are we going to recover
and what will the trajectory look like?" she said.
    Friday's data showed that U.S. retail sales posted record
declines in April for a second straight month as stay-in-place
orders to control the spread of the novel coronavirus kept
stores shuttered. The economy is on track for its biggest
contraction in the second quarter since the Great
Depression.
    Other data on Friday showed that industrial production
collapsed last month at the deepest pace in 101 years. The
reports, combined with a historic 20.5 million job losses in
April, buttressed Federal Reserve Chair Jerome Powell's warning
on Wednesday of an "extended period" of weak growth and stagnant
incomes.
    Traders seemed to look past such poor numbers, which do not
fit into conventional bond valuation models, said Guy LeBas,
chief fixed income strategist at Janney Montgomery Scott.
    "There's no forecasting framework for an economic shut-in of
this magnitude," he said. 
    While auctions of 10-year notes and 30-year bonds adding
supply this week might typically drive up yields, he said,  a 
Treasury auction of a new 20-year bond on May 20 may have a
greater impact.
    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 49 basis points, 2 basis points steeper
than on Thursday's close.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up less than
a basis point at 0.1511%.
       May 15 Friday 1:50PM New York / 1750 GMT
                               Price                  
 US T BONDS JUN0               180-29/32    -0-23/32  
 10YR TNotes JUN0              139-72/256   -0-36/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.12         0.122     0.000
 Six-month bills               0.15         0.1522    0.000
 Two-year note                 99-243/256   0.1511    0.002
 Three-year note               99-206/256   0.1905    0.001
 Five-year note                100-80/256   0.3113    0.011
 Seven-year note               100-16/256   0.4908    0.016
 10-year note                  99-208/256   0.6444    0.025
 30-year bond                  98-40/256    1.3247    0.029
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.75        -0.50    
 spread                                               
 U.S. 3-year dollar swap         6.00         0.00    
 spread                                               
 U.S. 5-year dollar swap         3.50         0.75    
 spread                                               
 U.S. 10-year dollar swap       -2.50         1.00    
 spread                                               
 U.S. 30-year dollar swap      -47.25         1.00    
 spread                                               
 
 (Reporting by Ross Kerber in Boston; Editing by David Gregorio
and Leslie Adler)
  
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