July 21, 2020 / 7:24 PM / 25 days ago

TREASURIES-Yields dip as economic stimulus talks intensify

 (Recasts, updates yields, adds analyst comments, overnight
repo)
    By Karen Pierog
    CHICAGO, July 21 (Reuters) - U.S. Treasury yields headed
lower on Tuesday despite mostly higher stocks, as markets
focused on negotiations over new federal aid to boost the
coronavirus-hit economy.
    The benchmark 10-year yield was last down 1.5
basis points at 0.6053%.
    Ben Jeffery, a strategist at BMO Capital Markets in New
York, said U.S. Federal Reserve purchases of bonds and the
central bank's commitment to keep interest rates low have
removed volatility from Treasuries while being positive for
stocks.
    "This (trading) range that we've seen continues to hold
despite what's been an impressive run in stocks," he said.
    Meanwhile, negotiations between congressional lawmakers and
the White House over a new round of aid intensified on Tuesday
as virus infections and deaths surged to record levels.

    Kathy Jones, chief fixed income strategist at the Schwab
Center for Financial Research in New York, said a
bigger-than-expected fiscal stimulus bill could steepen the
yield curve "and encourage expectations that maybe we get a
little more growth sooner rather than later and the Fed might
pivot sooner rather than later" in what would be a surprising
but possible scenario.      
    Jones said if a lot more states shut down again and 
evidence emerges that the economy is rolling back over to
recession, the 10-year yield could head lower.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was last down
less than a basis point at 0.1432%.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, which is viewed as an indicator of
economic expectations, was last at 46 basis points, less than a
basis point lower than at Monday's close.
   No bids were submitted in 28-day and overnight repurchase
agreement (repo) operations, according to the New York Federal
Reserve.
July 21 Tuesday 2:09PM New York / 1909 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1225       0.1242    0.000
 Six-month bills               0.1325       0.1344    0.000
 Two-year note                 99-247/256   0.1432    -0.006
 Three-year note               99-224/256   0.1671    -0.011
 Five-year note                99-230/256   0.2707    -0.014
 Seven-year note               100-80/256   0.4542    -0.014
 10-year note                  100-48/256   0.6053    -0.015
 20-year bond                  100-196/256  1.0819    -0.012
 30-year bond                  98-124/256   1.3116    -0.006
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.00         0.00    
 spread                                               
 U.S. 3-year dollar swap         5.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         3.75         0.50    
 spread                                               
 U.S. 10-year dollar swap       -2.25         0.50    
 spread                                               
 U.S. 30-year dollar swap      -46.75         0.50    
 spread                                               
                                                      
 


 (Reporting by Karen Pierog in Chicago; editing by Jonathan
Oatis)
  
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