June 8, 2020 / 7:38 PM / a month ago

TREASURIES-Yields fall as market gobbles up three-year notes

 (Recasts, updates yields, adds results for note auction,
analyst comments)
    By Karen Pierog
    CHICAGO, June 8 (Reuters) - U.S. Treasury yields retrenched
a little on Monday from last week's dramatic rise, while an
auction of three-year notes was met with solid demand.
    The benchmark 10-year yield was last down 2.6
basis points at 0.8785%. Yields spiked on Friday in the wake of
a better-than-expected May employment report with the 10-year
note yield rising above 0.9% for the first time since March 20.

    "Today in particular, the story is about the market finding
its footing after last week's job numbers," said Ben Jeffery, a
strategist at BMO Capital Markets in New York. 
    Meanwhile, the Treasury, which is financing massive stimulus
spending to combat the economic fallout from the coronavirus
outbreak, sold $44 billion of three-year notes with a
bid-to-cover ratio of 2.55 times, which was higher than average,
according to analysts.
    "No matter how you slice it, it was a good auction today,
which is noteworthy in the context of just how low yields are,"
Jeffery said, adding it was encouraging for the Treasury and the
market that recent debt auctions "have been taken down with
relative ease."
    Other sales this week include $29 billion of 10-year notes
on Tuesday and $19 billion of 30-year bonds on Thursday. 
    Also looming this week is a two-day Fed meeting. While no
major policy decisions are expected, the central bank will issue
its first economic projections since December.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes that is seen as an indicator of economic
expectations was at about 64.40 basis points, roughly 4 basis
points lower than at Friday's close.
    Bids submitted in a Monday morning overnight repurchase
agreement (repo) operation totaled $67.05 billion, according to
the New York Federal Reserve, which said it accepted all the
bids. Another $53.2 billion in bids were submitted and accepted
in a 29-day repo operation. 
June 8 Monday 2:13PM New York / 1913 GMT
                               Price                  
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1625       0.1648    0.008
 Six-month bills               0.1875       0.1908    0.008
 Two-year note                 99-204/256   0.2281    0.012
 Three-year note               99-136/256   0.2856    -0.008
 Five-year note                99-8/256     0.4471    -0.030
 Seven-year note               98-184/256   0.6884    -0.030
 10-year note                  97-152/256   0.8785    -0.026
 20-year bond                  94-204/256   1.4258    -0.031
 30-year bond                  90-144/256   1.6508    -0.027
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.25        -1.00    
 spread                                               
 U.S. 3-year dollar swap         5.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap         4.00         0.00    
 spread                                               
 U.S. 10-year dollar swap       -2.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -48.25         0.75    
 spread                                               
                                                      
 
 (By Karen Pierog; 
Editing by Marguerita Choy and Andrea Ricci)
  
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