July 22, 2020 / 2:16 PM / 24 days ago

TREASURIES-Yields fall ahead of 20-year bond auction

    By Karen Pierog
    CHICAGO, July 22 (Reuters) - U.S. Treasury yields fell on
Wednesday as the market awaited an auction of $17 billion of
20-year bonds and watched for developments on a new round of
federal aid for the coronavirus-hit economy.
    The benchmark 10-year yield was last down 2.1
basis points at 0.5856%, while the 20-year bond yield
 tumbled as low as 1.05%.
    The auction marks the third since the U.S. Treasury offered
20-year bonds in May for the first time since 1986. The bonds
began trading on May 21 at a yield of 1.177%.

    Jim Vogel, an interest rate strategist at FHN Financial in
Memphis, Tennessee, said the fact that the 20-year yield was low
versus "other opportunities on the long end of the curve" and
that more debt supply could result from economic stimulus
negotiations underway in Washington will make investors
cautious. 
    "The auction's going to go reasonably well, but don't know
if it will provide a lift for the market the way certainly the
10- and 30-year auctions did two weeks ago," he said.
    U.S. Republicans and Democrats remained far apart on Tuesday
on how much to spend on stimulus efforts to combat the economic
fallout from the coronavirus pandemic.
    Vogel said with Treasury trading "slowed to a crawl," there
was not a fundamental reason for any big moves in yields until a
deal emerges in Washington or the U.S Federal Reserve, which
meets next week, changes some of its outlook.
    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 44.20 basis points, about
1.50 basis points lower than at Tuesday's close.
July 22 Wednesday 9:06AM New York / 1406 GMT
                               Price                  
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.12         0.1217    -0.002
 Six-month bills               0.1325       0.1344    0.000
 Two-year note                 99-247/256   0.1432    0.000
 Three-year note               99-226/256   0.1645    -0.002
 Five-year note                99-242/256   0.2612    -0.010
 Seven-year note               100-108/256  0.4382    -0.016
 10-year note                  100-96/256   0.5856    -0.021
 20-year bond                  101-64/256   1.0549    -0.028
 30-year bond                  99-40/256    1.2841    -0.029
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.75        -0.25    
 spread                                               
 U.S. 3-year dollar swap         5.00        -0.25    
 spread                                               
 U.S. 5-year dollar swap         3.75         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.50         0.75    
 spread                                               
 U.S. 30-year dollar swap      -46.00         1.00    
 spread                                               
                                                      
 
 (By Karen Pierog in Chicago; editing by Jonathan Oatis)
  
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