March 20, 2020 / 9:50 PM / 20 days ago

TREASURIES-Yields decline after governor orders New York residents to stay home

 (Updates market activity)
    By Ross Kerber
    BOSTON, March 20 (Reuters) - U.S. Treasury yields fell on
Friday as an order for New York state residents to stay at home
reinforced concerns about the economic impact of the coronavirus
pandemic, and the Federal Reserve stepped in with measures aimed
at boosting liquidity.
    The yield on the benchmark 10-year note was down
24.4 basis points at 0.8853%, with a 43-basis-point swing in the
yield during the session continuing the volatility that marked
trading this week.
    The movement left a closely watched part of the U.S. yield
curve, the gap between the 2-year and 10-year notes
, at 55 basis points, 8 basis points lower than
its close on Thursday but still at a level not seen until
recently since 2018.
    New York Governor Andrew Cuomo's announcement that he would
issue an executive order mandating that 100% of the state's
non-essential workforce stay home and all non-essential
businesses close contributed to the afternoon Treasuries buying,
analysts said.
    California and Illinois have also ordered people to stay
home.
    Zhiwei Ren, managing director and portfolio manager for   
Penn Mutual Asset Management, said the stay-at-home orders
likely were seen as disruptive by keeping financial teams apart.
    Priya Misra, head of global rates strategy for TD
Securities, said investors also seemed to react to operations by
the Fed to stabilize the financial system. Late on Friday the
New York Fed posted a schedule indicating it would buy more than
$70 billion worth of Treasury securities on Monday, a relatively
large amount that Misra said was meant to send a strong message
the Fed would act as necessary to keep markets functioning.
    "They are serious here," she said.
    Separately, the New York Fed on Friday accepted a total of
$67 billion in bids in repurchase agreement operations,
according to its website.   
    Major U.S. stock indexes closed down about 4% on Friday,
which Misra said also made it likely investors were buying
safer-seeming Treasuries ahead of the weekend.
    Andrew Richman, managing director of fixed income at
Truist/SunTrust Advisory Services, said that although actions by
the Fed and other parts of the U.S. government seemed to be
keeping the financial system liquid, there was little cause for
short-term optimism. 
    The yield on the 3-month Treasury bill remained
close to zero, and Richman and others said that while the
10-year yield was higher than last week, it was still at a
relatively low level.
    Together, the numbers are "telling us that we'll have
negative growth and the Fed will be at virtually zero for a long
time," Richman said.
    March 20 Friday 5:18PM New York / 2118 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0475       0.0483    -0.015
 Six-month bills               0.04         0.0406    -0.005
 Two-year note                 101-139/256  0.3254    -0.096
 Three-year note               100-86/256   0.3865    -0.142
 Five-year note                103-36/256   0.4806    -0.173
 Seven-year note               102-104/256  0.7681    -0.223
 10-year note                  105-208/256  0.8853    -0.244
 30-year bond                  112-180/256  1.4731    -0.278
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        19.75         2.25    
 spread                                               
 U.S. 3-year dollar swap        13.25         4.75    
 spread                                               
 U.S. 5-year dollar swap         8.00         2.00    
 spread                                               
 U.S. 10-year dollar swap       -8.75         6.75    
 spread                                               
 U.S. 30-year dollar swap      -64.50        12.00    
 spread                                               
 
 (Reporting by Ross Kerber; Editing by Dan Grebler and Leslie
Adler)
  
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