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TREASURIES-Longer-term yields stabilize, intermediate yields fall after auctions

Fri, 28th Aug 2020 14:39

By Ross Kerber
Aug 28 (Reuters) - Longer-term U.S. Treasury yields
stabilized on Friday after a run-up the day before on the
Federal Reserve's new approach to inflation, while investors
rebalanced intermediate-dated debt following large auctions
earlier this week.
The benchmark 10-year yield was down 1.3 basis
points at 0.7326% in morning trading, while the 5-year note
was down 2.4 basis points at 0.2862%.
U.S. Treasury auctions of roughly $150 billion worth of
3-year, 5-year and 7-year notes received strong demand starting
on Tuesday. The decline in yields on each of those instruments
on Friday likely reflected traders repositioning, said Subadra
Rajappa, head of U.S. rates strategy for Societe Generale.
"A lot of this movement I would chalk off as more month-end
buying, as opposed to anything fundamental," she said.
Longer-term yields climbed sharply after Fed Chair Jerome
Powell on Thursday unveiled the U.S. central bank's new approach
to monetary policy that puts more emphasis on fighting
shortfalls in unemployment and less weight on concerns about
higher inflation.
The yield on the 30-year U.S. bond reached as
high as 1.5770% after Powell spoke, its highest since June 16.
It was unchanged at 1.5003% in morning trading on Friday.
U.S. consumer spending increased more than expected in July,
new data showed, strengthening expectations for a sharp rebound
in economic growth in the third quarter, though momentum is
likely to ebb as the COVID-19 pandemic lingers and fiscal
stimulus dries up.
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 59 basis points, about a basis point less
than Thursday's close, a level unseen since June 10.
The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 1.5
basis points at 0.1426%.

August 28 Friday 9:17AM New York / 1317 GMT



Price Current Net
Yield % Change
(bps)
Three-month bills 0.1 0.1014 0.000
Six-month bills 0.11 0.1119 -0.002
Two-year note 99-247/256 0.1426 -0.015
Three-year note 99-224/256 0.1674 -0.024
Five-year note 99-210/256 0.2862 -0.024
Seven-year note 99-238/256 0.5102 -0.024
10-year note 98-248/256 0.7326 -0.013
20-year bond 97-88/256 1.2762 -0.004
30-year bond 96-252/256 1.5003 0.000

DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 9.00 0.25
spread
U.S. 3-year dollar swap 8.00 0.75
spread
U.S. 5-year dollar swap 6.00 0.50
spread
U.S. 10-year dollar swap 0.25 0.75
spread
U.S. 30-year dollar swap -37.25 -0.25
spread




(Reporting by Ross Kerber in Boston
Editing by Paul Simao)

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