February 26, 2020 / 6:34 PM / a month ago

TREASURIES-Yields steady as traders position against coronavirus economic risks

 (Updates with market activity, analyst comment, housing data,
auction results)
    By Ross Kerber
    BOSTON, Feb 26 (Reuters) - U.S. Treasury yields were little
changed on Wednesday as traders adjusted portfolios against
risks the spreading coronavirus epidemic will have a major
economic impact.
    The benchmark 10-year yield was up less than a
basis point in afternoon trading at 1.3337%, a day after it
reached a new record low of 1.3072%.
    A focus of Wednesday's trading was the extent to which the
epidemic would disrupt global supply chains and services, and
provoke official responses from governments and central banks. 
    Despite strong housing data and higher U.S. stock markets,
Treasury investors were wary.
    "Even though there was a bit of a bounce in equities, the
bond market is still saying there are problems out there," said 
 Cantor Fitzgerald Treasury analyst Justin Lederer.
    On Wednesday morning 10-year Treasury yields were as high as
1.382%. Bryn Mawr Trust director of fixed income Jim Barnes said
the higher rates were not a reason investors were buying more of
the notes, however. 
    "I wouldn't say these yields are attractive, it's more a
place to park cash," he said.
    U.S. stocks attempted a recovery on Wednesday after a rocky
start to the week that shaved more than 6% off the main indexes
on growth concerns tied to the virus. Investors
were cautious as the U.S. Centers for Disease Control and
Prevention urged Americans to prepare for the virus to spread in
the United States.
    However, new Commerce Department data on Wednesday showed
sales of new U.S. single-family homes raced to a 12-1/2-year
high in January, indicating housing market strength that could
help blunt any hit to the economy from the coronavirus and keep
the longest economic expansion in history on track.
    On Wednesday afternoon the U.S. Treasury Department said it
accepted $41 billion in bids for five-year notes out of $100.7
billion worth of public bids tendered, at a high yield of 1.15%.
    Primary dealers accounted for 28.7% of competitive bids
accepted, somewhat higher than the 23.4% average, according to a
research note from BMO Capital Markets.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 2.4
basis points at 1.1667 in afternoon trading.
     
    February 26 Wednesday 1:10PM New York / 1810 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.4975       1.5282    -0.003
 Six-month bills               1.41         1.4438    -0.010
 Two-year note                 99-235/256   1.1667    -0.024
 Three-year note               100-170/256  1.1467    -0.008
 Five-year note                101-10/256   1.1573    0.000
 Seven-year note               101-160/256  1.2543    0.003
 10-year note                  101-140/256  1.3337    0.004
 30-year bond                  104-64/256   1.8155    0.013
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         4.00         2.25    
 spread                                               
 U.S. 3-year dollar swap         1.25         0.25    
 spread                                               
 U.S. 5-year dollar swap         0.25         0.50    
 spread                                               
 U.S. 10-year dollar swap       -5.75         0.75    
 spread                                               
 U.S. 30-year dollar swap      -37.25         1.25    
 spread                                               
 

 (Reporting by Ross Kerber; Editing by Bernadette Baum and Tom
Brown)
  
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