May 11, 2020 / 1:33 PM / 21 days ago

TREASURIES-Yields steady as traders look for next policy steps

    By Ross Kerber
    BOSTON, May 11 (Reuters) - Cautious traders kept U.S.
Treasury yields little changed on Monday as they tried to gauge
what further steps policymakers might take to blunt the economic
impact of the deadly COVID-19 pandemic. 
    The benchmark 10-year yield was up less than a
basis point in morning trading at 0.686%.
    Yields on other instruments also were little changed, and
more stable than on Friday. Then, two-year Treasury yields hit
record lows on technical factors and concerns the Federal
Reserve could cut rates into negative territory.
    Data showed the U.S. economy lost a staggering 20.5 million
jobs in April in a stark sign of how the novel pandemic has
battered the world's largest economy.
    Michael Lorizio, senior fixed income trader for Manulife
Investment Management in Boston, said Monday's calm showed
investors staying crowded into shorter-term securities with no
signs the Fed would raise interest rates anytime soon.
    "The front end of the curve is an easy place to own," he
said. "There are forecasts for the next rate hike to come
sometime in 2023, it's as good as any prediction but it's still
just a guess," he said.    
    The U.S. Treasury is scheduled to give results of an auction
of 3-year notes around 1 p.m.
    Germany reported on Monday that new coronavirus infections
were accelerating exponentially after early steps to ease its
lockdown, news that sounded a global alarm even as businesses
opened from Paris hair salons to Shanghai
Disneyland.
    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 53 basis points, about a basis point higher
than on Friday's close.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was  up less than
a basis point at 0.1509%.

    May 11 Monday 9:09AM New York / 1309 GMT
                               Price                  
 US T BONDS JUN0               179-11/32    -0-11/32  
 10YR TNotes JUN0              138-240/256  -0-4/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.115        0.1169    0.000
 Six-month bills               0.1375       0.1399    -0.007
 Two-year note                 99-243/256   0.1509    0.002
 Three-year note               100-34/256   0.2045    -0.002
 Five-year note                100-62/256   0.3258    0.002
 Seven-year note               99-206/256   0.5286    0.003
 10-year note                  107-172/256  0.686     0.005
 30-year bond                  114-132/256  1.4018    0.019
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.75         0.00    
 spread                                               
 U.S. 3-year dollar swap         4.50         0.25    
 spread                                               
 U.S. 5-year dollar swap         1.75         0.00    
 spread                                               
 U.S. 10-year dollar swap       -4.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -50.50        -0.25    
 spread                                               
 



 (Reporting by Ross Kerber
Editing by Nick Zieminski)
  
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