April 30, 2020 / 7:07 PM / a month ago

TREASURIES-Yields fall, two-year note touches lowest level since 2011

 (Updates yields, adds analyst comments, one-day repo results)
    By Karen Pierog
    CHICAGO, April 30 - Most U.S. Treasury yields tumbled on
Thursday with the two-year note yield falling to its lowest
level since 2011 at one point on month-end market maneuvering as
stocks slipped on the heels of more grim news on the
coronavirus-battered economy. 
    The benchmark 10-year yield was last down 2.9
basis points at 0.5983%.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, dropped to as low
as 0.176% and was last down 1.5 basis points at 0.1838%.
    Guy LeBas, chief fixed income strategist for Janney
Montgomery Scott LLC said "a little bit" of month-end index
buying and rebalancing across the curve could be pushing yields
lower.
    "You see the risk-off in the equities markets that may be
driving a little buying," he said. 
    Stan Shipley, fixed income strategist at Evercore ISI in New
York, said yields were retreating after the market got ahead of
itself on Wednesday over reports concerning a drug to combat the
virus.
    "We thought we were maybe close to open up cleanly here and
they now realize this is not a silver bullet," he said.
    Yields on longer-term Treasuries rose on Wednesday after
Gilead Sciences Inc reported that its experimental
antiviral drug remdesivir helped improved symptoms in COVID-19
patients who were administered the medication early.
   Meanwhile, bad news on the economic front was piling up.
   Initial claims for state unemployment benefits totaled a
seasonally adjusted 3.839 million for the week ended April 25,
the U.S. Labor Department reported on Thursday. That was down
from 4.442 million in the prior week but above the 3.5 million
claims expected by economists polled by Reuters.
    On Wednesday, data showed the economy in the first quarter
recorded its sharpest contraction since the Great Recession. The
Federal Reserve repeated its vow Wednesday to do all it can to
stop the bleeding.
    Bill Merz, head of fixed income research at U.S. Bank Wealth
Management in Minneapolis, said with economic fundamentals
unclear, Treasury yields remain in a holding pattern under the
watchful eye of the Fed.
    "There's reasonable odds the Fed could make a concerted
effort to contain long-end rates if they rise too much, too
fast," he said.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 41.10 basis points, about a basis point
lower than Wednesday's close.
    In repurchase agreement (repo) operations, no bids were
submitted for an overnight operation and all $12.15 billion of
bids were accepted at a one-day operation, according to the New
York Federal Reserve's website. 
   April 30 Thursday 1:25PM New York / 1825 GMT
                               Price                  
 US T BONDS JUN0               181-20/32    0-8/32    
 10YR TNotes JUN0              139-56/256   0-64/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.105        0.1068    0.006
 Six-month bills               0.1125       0.1141    -0.013
 Two-year note                 99-226/256   0.1838    -0.015
 Three-year note               100-14/256   0.2314    -0.016
 Five-year note                100-52/256   0.334     -0.028
 Seven-year note               100-4/256    0.4977    -0.028
 10-year note                  108-144/256  0.5983    -0.029
 30-year bond                  118-184/256  1.2459    0.003
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        13.00         0.50    
 spread                                               
 U.S. 3-year dollar swap         8.50         0.75    
 spread                                               
 U.S. 5-year dollar swap         5.50         1.00    
 spread                                               
 U.S. 10-year dollar swap        1.25         1.00    
 spread                                               
 U.S. 30-year dollar swap      -44.75        -0.75    
 spread                                               
 

 (By Karen Pierog in Chicago
Editing by Alistair Bell and Tom Brown)
  
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