May 20, 2020 / 6:22 PM / 12 days ago

TREASURIES-Yields fall after first 20-year bond auction in decades

 (Recasts, adds 20-year auction results and analyst comments,
updates yields)
    CHICAGO, May 20 (Reuters) - U.S. Treasury yields slipped on
Wednesday after the first auction of 20-year bonds in decades
was met with "decent" demand.
    The benchmark 10-year yield was last down 2.9
basis points at 0.6818%, slightly below its level before the
sale results were announced and extending a decline from
Tuesday's late levels.
    For the first time since 1986, the U.S. Treasury sold $20
billion in 20-year bonds at a high yield of 1.22%. The
bid-to-cover ratio, a metric of overall demand, was 2.53.
Primary dealers, who must absorb any supply not bought by direct
and indirect buyers, took 24.6% of the deal.

    The market was shunning the new kid, according to Jim Vogel,
an interest rate strategist at FHN Financial in Memphis,
Tennessee,. 
    "It will likely take 3-4 months or a significantly steeper
curve to fold new (20-year bonds) better into the Treasury
complex...to where they're no longer just the kid brother of the
30-year (bonds)," he wrote in commentary following the auction.
    The auction was "pretty decent" even though there was a
small tail, said Subadra Rajappa, head of U.S. rates strategy,
Societe Generale in New York, referring to the slightly lower,
when-issued yield of 1.215% heading into the auction. 
    More 20-year bonds are coming as a total of $54 billion is
expected over three months. Rajappa said the question will be
"how much demand you're going to see on a consistent basis."
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was last down 1.2
basis points at 0.1613%.
    Bids submitted in a Wednesday morning overnight repurchase
agreement (repo) operation totaled $7 billion, according to the
New York Federal Reserve, which said it accepted all the bids.
  May 20 Wednesday 12:53PM New York / 1753 GMT
                               Price                  
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1225       0.1246    -0.004
 Six-month bills               0.1475       0.1497    -0.005
 Two-year note                 99-238/256   0.1613    -0.012
 Three-year note               99-194/256   0.2065    -0.014
 Five-year note                100-54/256   0.3319    -0.016
 Seven-year note               99-224/256   0.5183    -0.023
 10-year note                  99-116/256   0.6818    -0.029
 30-year bond                  96-48/256    1.4063    -0.030
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50        -0.25    
 spread                                               
 U.S. 3-year dollar swap         5.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap         3.00        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -47.75         0.50    
 spread                                               
 

 (Reporting by Karen Pierog in Chicago; Editing by Alden Bentley
and Leslie Adler)
  
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