May 1, 2020 / 3:04 PM / a month ago

TREASURIES-Yields slightly higher after weak U.S. manufacturing data

    CHICAGO, May 1 - U.S. Treasury yields inched higher on
Friday after data showed the nation's manufacturing activity
plunged to an 11-year low in April as the coronavirus outbreak
hurt supply chains. 
    The benchmark 10-year yield was last up 1.7
basis point at 0.6418%.
    The Institute for Supply Management (ISM) reported its index
of national factory activity dropped to a reading of 41.5 last
month from 49.1 in March.
    Otherwise, the market was largely sidelined ahead of U.S.
Treasury announcements next week, including how much the
government plans to borrow to finance stimulus measures aimed at
combating the fallout from the outbreak.
    "It's hard to envision someone putting on a big position
ahead of potential risk events next week," said Tom Simons,
money market economist at Jefferies in New York.
    Simons said the Treasury's projection for second-quarter
borrowing "is just going to be astronomical."
    "There's a lot of uncertainty how Treasury is going to
handle the financing issues because the total number they have
to come up with is so big," he said.
    The market will also be focused on the April employment
report due out in a week, Simons said, adding: "We already know
the data is going to be horrendous, but it's a question if the
market is particularly interested in the details."
    With bad economic news building, Dallas Federal Reserve
President Robert Kaplan told Fox Business Network on Friday that
interest rates will stay lower for longer while the U.S. central
bank has more work to do to help the economy through the crisis.

    Meanwhile, as stay-at-home orders are gradually being
lifted, investors are assessing whether the move will bring
economic relief or a surge in coronavirus infections.

    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up less than
a basis point at 0.1959%. 
    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 44 basis points, less than a basis point
higher than at Thursday's close.
    In repurchase agreement (repo) operations on Friday, no bids
were submitted for an overnight operation. 
    May 1 Friday 9:44 AM New York / 1444 GMT
                               Price                  
 US T BONDS JUN0               180-14/32    -0-19/32  
 10YR TNotes JUN0              138-228/256  -0-44/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.105        0.1068    0.001
 Six-month bills               0.11         0.1116    -0.002
 Two-year note                 99-220/256   0.1959    0.008
 Three-year note               100          0.25      0.013
 Five-year note                100-16/256   0.3623    0.017
 Seven-year note               99-198/256   0.5331    0.016
 10-year note                  108-32/256   0.6418    0.017
 30-year bond                  117-128/256  1.2904    0.019
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        12.75         0.00    
 spread                                               
 U.S. 3-year dollar swap         7.50        -0.75    
 spread                                               
 U.S. 5-year dollar swap         4.50        -0.50    
 spread                                               
 U.S. 10-year dollar swap        0.00        -0.75    
 spread                                               
 U.S. 30-year dollar swap      -46.75        -0.50    
 spread                                               
 
 (Reporting by Karen Pierog in Chicago
Editing by Paul Simao)
  
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