July 16, 2020 / 7:27 PM / a month ago

TREASURIES-Yields fall as COVID-19 spread weighs on risk sentiment

 (Adds comments from Fed's Evans, updates prices)
    By Karen Brettell
    NEW YORK, July 16 (Reuters) - U.S. Treasury yields fell on
Thursday as the rapid spread of coronavirus cases across some
American states weighed on risk sentiment, even as data showed
U.S. economic improvement.
    A surge in COVID-19 infections in numerous Southern U.S.
states has raised concerns that new business shutdowns meant to
stem the spread of the virus will cause fresh economic damage.
    “The next two months are really critical, can the economy
survive this surge in COVID cases in the Sunbelt, is that surge
going to manifest itself elsewhere too,” said Tom Simons, a
money market economist at Jefferies in New York.
    “The risk of owning some protection is relatively low and I
think that’s generally the bias. You want to have some
Treasuries no matter what,” Simons added.
    Benchmark 10-year notes fell two basis points to
0.612%. They have held in a tight range from 0.569% to 0.784%
since mid-June.
    The yield curve between two-year and 10-year notes
 flattened one basis point to 47 basis points.
    Bonds rallied even after U.S. data showed recent improvement
in the economy.
    U.S. retail sales increased by 7.5% in June, which was more
than economists expected. A gauge of manufacturing activity in
the U.S. Mid-Atlantic region also jumped in July.

    The Labor Department showed 1.30 million people filed for
state unemployment benefits during the week ending July 11,
slightly down from 1.31 million in the prior period.

    That was above economists's expectations of 1.25 million
claims, however, and investors are concerned that they could
rise again as more businesses close to contain the spread of
    Chicago Federal Reserve Bank President Charles Evans said on
Thursday he would be "hard-pressed" to think of any reason to
start to raise interest rates unless inflation soars above the
Fed's 2% target, a development he said was unlikely.
    Evans forecast U.S. unemployment to fall only to 6.5% by the
end of next year, above the level many economists see as
consistent with full employment.
      July 16 Thursday 3:00PM New York / 1900 GMT
 US T BONDS SEP0               180-7/32     0-16/32   
 10YR TNotes SEP0              139-124/256  0-36/256  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.1125       0.1141    -0.023
 Six-month bills               0.1325       0.1344    -0.008
 Two-year note                 99-245/256   0.147     -0.008
 Three-year note               99-220/256   0.1721    -0.008
 Five-year note                99-224/256   0.2754    -0.010
 Seven-year note               100-78/256   0.4554    -0.015
 10-year note                  100-32/256   0.6119    -0.018
 20-year bond                  100-208/256  1.0794    -0.027
 30-year bond                  98-192/256   1.3007    -0.030
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         7.25         0.25    
 U.S. 3-year dollar swap         5.50         0.25    
 U.S. 5-year dollar swap         3.75         0.00    
 U.S. 10-year dollar swap       -1.75         0.50    
 U.S. 30-year dollar swap      -46.25         0.75    

 (Reporting by Karen Brettell; editing by Jonathan Oatis)
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