May 19, 2020 / 2:02 PM / 18 days ago

TREASURIES-Yields move lower ahead of Fed chair's Senate testimony

    May 19 (Reuters) - U.S. Treasury yields were lower on
Tuesday as the market awaited testimony by Federal Reserve Chair
Jerome Powell before the Senate Banking Committee on the
government's economic response to the coronavirus pandemic.
   The benchmark 10-year yield was last down 2.4
basis points at 0.7176%
    Bill Merz, head of fixed income research at U.S. Bank Wealth
Management in Minneapolis, said Powell is expected to continue
his messaging from recent days in terms of the economic outlook
being unclear and the Fed's willingness to take additional
action.
    "It would not be surprising if he continues to nudge
Congress toward further fiscal stimulus," Merz added.
   Powell said in prepared remarks for the hearing released on
Monday that the Coronavirus Aid, Relief and Economic Security
(CARES) Act was "critical" to the U.S. central bank's ability to
expand credit throughout the economy to offset the blow from the
coronavirus.
    Meanwhile, Wednesday's auction of $20 billion of 20-year
bonds should be met with "plenty of demand," according to Merz.
    "It provides one more financing option for the Treasury and
it fills a need for some investors who are more active on the
long end of the curve," he said.
     The two-year U.S. Treasury yield, which
typically moves in step with interest rate expectations, was
last down 1 basis point at 0.1733%.
    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 55.24 basis points, about 6 basis points
higher than on Monday's close.
   Bids submitted in a Tuesday morning overnight repurchase
agreement (repo) operation totaled $1 billion backed by
mortgage-backed securities, according to the New York Federal
Reserve, which said it accepted all the bids.
    May 19 Tuesday 8:49AM New York / 1349 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.13         0.1322    0.000
 Six-month bills               0.1575       0.1598    0.005
 Two-year note                 99-232/256   0.1733    -0.010
 Three-year note               99-182/256   0.2222    -0.016
 Five-year note                100-24/256   0.3558    -0.021
 Seven-year note               99-172/256   0.5482    -0.023
 10-year note                  99-28/256    0.7176    -0.024
 30-year bond                  95-68/256    1.4451    -0.011
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.00         0.00    
 spread                                               
 U.S. 3-year dollar swap         5.50         0.00    
 spread                                               
 U.S. 5-year dollar swap         3.25         0.00    
 spread                                               
 U.S. 10-year dollar swap       -2.50        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -48.25        -0.75    
 spread                                               
 
 (By Karen Pierog; Editing by David Gregorio)
  
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