February 12, 2020 / 10:12 PM / 11 days ago

TREASURIES-Yields higher as new coronavirus cases reportedly decline

 (Updates with market activity, results of 10-year auction)
    By Ross Kerber
    BOSTON, Feb 12 (Reuters) - U.S. Treasury yields rose on
Wednesday amid renewed risk tolerance after a reported drop in
the number of new coronavirus cases in China alleviated some
concerns about economic growth.
    The benchmark 10-year yield was up 4.8 basis
points in afternoon trading at 1.6385%.
    Investors sold safe-haven bonds and bid up other assets,
including U.S. stocks, also encouraged by the latest quarterly
earning reports.
    "There seems to be better risk appetite," said John Briggs,
head of strategy, Americas, at NatWest Markets. Wednesday's 
trading, he said, reflects "a removal of the flight-to-quality"
seen in recent days.
    On Wednesday afternoon, the U.S. Treasury Department said it
accepted $27 billion in bids for 10-year notes, out of $69.67
billion worth of bids tendered, at a median yield of 1.577%.
    Briggs said Treasury markets were likely not affected by
comments from U.S. Federal Reserve chairman Jerome Powell, who
on Wednesday reiterated his confidence in the sustainability of
the record-long U.S. economic expansion.
    "There’s no reason why the current situation of low
unemployment, rising wages, high job creation - there’s no
reason why it can’t go on," Powell told the Senate Banking
Committee in his second day of congressional testimony.

    China reported its lowest number of new coronavirus cases
since January, lending weight to a prediction by its top medical
adviser that the outbreak will end by April.
    However, it was still unclear to what extent economic growth
would take a hit from the virus, which has killed more than
1,100 people, shuttered businesses in China and briefly
disrupted a global stock market rally in the past
weeks.            
    In Washington, U.S. Treasury Secretary Steven Mnuchin said
that the negative economic impact from the coronavirus outbreak
is a one-time event that will not last beyond 2020.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 2.9 basis
points at 1.4458 % in afternoon trading.
    
    February 12 Wednesday 4:50PM New York / 2150 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.545        1.5769    -0.002
 Six-month bills               1.515        1.5521    0.002
 Two-year note                 99-221/256   1.4458    0.029
 Three-year note               99-220/256   1.4232    0.032
 Five-year note                99-158/256   1.4552    0.046
 Seven-year note               99-160/256   1.557     0.048
 10-year note                  101          1.6385    0.048
 30-year bond                  106-40/256   2.0958    0.044
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         4.25         1.25    
 spread                                               
 U.S. 3-year dollar swap         2.50         2.00    
 spread                                               
 U.S. 5-year dollar swap         0.50         1.25    
 spread                                               
 U.S. 10-year dollar swap       -4.75         1.25    
 spread                                               
 U.S. 30-year dollar swap      -31.75         1.75    
 spread                                               
 
 (Reporting by Ross Kerber; 
Editing by Chizu Nomiyama and Alistair Bell)
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