February 25, 2020 / 2:52 PM / a month ago

TREASURIES-Yields tick down as traders keep eye on coronavirus risk

    By Ross Kerber
    BOSTON, Feb 25 (Reuters) - U.S. Treasury yields ticked lower
on Tuesday as traders kept up the flight to safety on concerns
the coronavirus epidemic would have a significant impact on
global growth.
    Even as global stock markets stabilized the day after a
sell-off, the benchmark 10-year yield was down in
morning trading at 1.3688%, edging closer to its all-time low of
1.321% reached on July 6, 2016..
    Dozens of countries have accelerated emergency measures to
curb the spread of the coronavirus, which has killed 2,663 in
China although the World Health Organization (WHO) says the
epidemic there has peaked.
    Even before the epidemic's reach expanded, many traders had
re-evaluated expectations for global growth in 2020, said John
Herrmann, director of U.S. rates strategy for MUFG Securities.
Fears of the outbreak accelerated a decline in yields on
instruments like the 10-year, which had been approaching 2% late
last year, he said.
    "People had started to dial down their expectations. The 
coronavirus just piled onto that as a giant risk-off trend,"
Herrmann said. 
    Traders will watch results of a U.S. Treasury auction of $40
billion worth of two-year notes later on Tuesday. The yield on
the note, which typically move in step with interest rate
expectations, was down 2.3 basis points at 1.2433% in morning
trading.
    Believed to come from wildlife in Wuhan city late last year,
the flu-like disease has infected 80,000 people and killed 2,663
in China. 
    While health officials say epidemic has been declining in
China since Feb 2, it has jumped to about 29 other countries and
territories, with outbreaks in Iran, Italy and South Korea of
particular concern.
    In European trading on Tuesday investors favored
higher-rated German bonds over debt issued by Italy, Greece and
Spain. The trading came despite new data showed
shrinking exports held back German economic activity in the
fourth quarter of last year, confirming that Europe's largest
economy was stagnating even before the coronavirus outbreak
began.
    
  February 25 Tuesday 9:26AM New York / 1426 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5125       1.5437    0.003
 Six-month bills               1.4425       1.4773    -0.003
 Two-year note                 100-64/256   1.2433    -0.023
 Three-year note               100-134/256  1.195     -0.024
 Five-year note                100-214/256  1.1998    -0.018
 Seven-year note               101-96/256   1.2918    -0.012
 10-year note                  101-56/256   1.3688    -0.008
 30-year bond                  103-200/256  1.8354    -0.001
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         1.75         1.00    
 spread                                               
 U.S. 3-year dollar swap         0.75         1.00    
 spread                                               
 U.S. 5-year dollar swap        -0.50         1.50    
 spread                                               
 U.S. 10-year dollar swap       -6.25         1.25    
 spread                                               
 U.S. 30-year dollar swap      -37.00         1.00    
 spread                                               
 
 (Reporting by Ross Kerber; Editing by David Gregorio)
  
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