June 26, 2020 / 6:34 PM / 15 days ago

TREASURIES-Yields lower as COVID-19 cases surge in major states

 (Updates with market activity, analyst comment, new state
public health efforts)
    By Ross Kerber
    June 26 (Reuters) - U.S. Treasury yields fell on Friday as
continuing public health concerns prevailed over a rebound in
consumer spending and sent traders into risk-off mode. 
    The benchmark 10-year yield was 3.3 basis points
lower at 0.6413%, the lowest since June 1.
    The Commerce Department said consumer spending, which
accounts for more than two-thirds of U.S. economic activity,
jumped 8.2% last month after falling 12.6% in April.

    But the gains were not seen as sustainable amid high
unemployment and as the United States set a new record for a
one-day increase in COVID-19 cases. 
    Texas and Florida both put limits on bars and restaurants,
setting back their efforts to reopen their economies amid the
pandemic.
    Trade worries also sent stocks lower, driving up demand for
safer U.S. bonds. But the steady progress of the coronavirus
seemed to be the major factor for fixed-income investors as it
hit big states making up a sizable part of U.S. economic output,
said Priya Misra, head of global rates strategy for TD
Securities.
    "The hope was there wouldn't be more lockdowns. But Texas
taking a step back put that in question and it is affecting
consumer sentiment," Misra said.
    Wall Street's major indexes tumbled on Friday after a report
that the U.S. intervention in Chinese interests could endanger
the Phase 1 trade deal. The Wall Street Journal said U.S.
"meddling" in Hong Kong, Taiwan and other matters could
jeopardize Chinese goods purchases under the trade deal.

    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 47 basis points - well below its monthly
high of 72 basis points reached on June 5.
            
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 1.8
basis points at 0.1661%, its lowest since June 3.
    
      June 26 Friday 2:19PM New York / 1819 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1425       0.1445    0.002
 Six-month bills               0.1675       0.17      -0.003
 Two-year note                 99-235/256   0.1661    -0.018
 Three-year note               100-50/256   0.1838    -0.021
 Five-year note                99-194/256   0.2988    -0.027
 Seven-year note               100-24/256   0.4864    -0.035
 10-year note                  99-216/256   0.6413    -0.033
 20-year bond                  99-140/256   1.1505    -0.035
 30-year bond                  96-204/256   1.3812    -0.036
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.00         0.25    
 spread                                               
 U.S. 3-year dollar swap         5.75         0.25    
 spread                                               
 U.S. 5-year dollar swap         3.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -1.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -48.75         0.00    
 spread                                               
                                                      
 
    
    

    
 (Reporting by Ross Kerber in Boston; editing by Jonathan Oatis)
  
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