June 25, 2020 / 7:00 PM / 16 days ago

TREASURIES-Yields slip as COVID-19 rise clouds economic view

 (Updates with market activity, analyst comment, auction result)
    By Ross Kerber and Chuck Mikolajczak
    June 25 (Reuters) - U.S. Treasury yields dipped on Thursday,
but were off earlier lows as traders weighed signs of a
resurgence in the coronavirus against a round of economic data
suggesting the worst of the lockdown-induced damage could be
over.
    The yield on the benchmark 10-year note was down
1.2 basis points at 0.6724%, and off its earlier low of 0.656%.
    The trading followed a similar pattern on Wednesday and
brought the note's yield far below its monthly high of 0.959%
reached on June 5.
    Initial claims for state unemployment benefits totaled a
seasonally adjusted 1.48 million for the week ended June 20,
down from 1.54 million in the prior week, the Labor Department
said on Thursday, but still a large number, buttressing views
the labor market could take years to recover.
    But a separate report for orders of U.S.-made capital goods
rose more than anticipated, while the final reading of gross
domestic product for the first quarter was as anticipated,
showing a contraction of 5%.
    "Once we got the data, the market kind of stabilized and
bonds started selling off a bit price-wise, going a little
higher in yield," said Tom di Galoma, managing director at
Seaport Global Holdings in New York. 
    "However, the virus kicking in again is definitely worrisome
for markets," he said.
    Texas Governor Greg Abbott said on Thursday he was halting
his state's phased economic reopening in response to a jump in
COVID-19 infections and hospitalizations, as the number of new
daily cases around the country climbed to a near-record high.
    The announcement came after several states on Wednesday
ordered new quarantines for some travelers, Walt Disney Co
 delayed the reopening of its theme parks, and Nevada's
governor signed a directive requiring face coverings in casinos
and all other public places.    
    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 49 basis points, roughly unchanged since
Wednesday.
The 2-year note, which typically moves in step with
interest rate expectations, last yielded 0.1837%, down less than
a basis point.
    Results from a Treasury Department auction of $41 billion of
seven-year notes on Thursday showed good demand, with
non-dealers accounting for 78.3% of accepted bids, versus an
average of 76.7%, according to a note from BMO Capital Markets.
    
        June 25 Thursday 2:47PM New York / 1847 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.14         0.142     -0.010
 Six-month bills               0.17         0.1725    0.002
 Two-year note                 99-226/256   0.1837    -0.004
 Three-year note               100-32/256   0.2078    0.000
 Five-year note                99-160/256   0.3257    -0.004
 Seven-year note               99-236/256   0.5115    -0.007
 10-year note                  99-140/256   0.6724    -0.012
 20-year bond                  98-248/256   1.1833    -0.024
 30-year bond                  96-8/256     1.4133    -0.033
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.75         0.50    
 spread                                               
 U.S. 3-year dollar swap         5.25         0.50    
 spread                                               
 U.S. 5-year dollar swap         3.50        -0.75    
 spread                                               
 U.S. 10-year dollar swap       -1.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -48.75        -0.25    
 spread                                               
                                                      
 
    
 (Reporting by Ross Kerber in Boston and by Chuck Mikolajczak in
New York; Editing by Andrea Ricci and Jonathan Oatis)
  
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