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TREASURIES-Yield curve steeper as stocks rise, Fed meets

Tue, 15th Sep 2020 15:10

By Ross Kerber
Sept 15 (Reuters) - Investors drove longer-term U.S.
Treasury yields higher on Tuesday, steepening the yield curve,
as equity markets rose while the Federal Reserve began a two-day
meeting.
The benchmark 10-year yield was a basis point
higher at 0.6789% in morning trading.
U.S. stocks opened higher on Tuesday as upbeat data from
China revived optimism around an economic rebound, while
investors looked for more stimulus from the Fed.
U.S. import prices increased more than expected in August
and gains in the prior month were revised sharply higher,
supporting the view that inflation pressures were building
up.
Michael Lorizio, senior fixed income trader for Manulife
Investment Management, said another factor driving longer-term
yields higher was likely positioning by traders ahead of a large
auction of 20-year bonds by the U.S. Treasury in the
early afternoon.
"There's an anticipation that if you need to add some
duration, you might be able to add it a bit cheaper later in
today's trading," Lorizio said.
The 20-year bond was reintroduced only in May, giving
investors less trading data on which to forecast its value.
Oil prices rose, supported by hurricane supply disruptions
in the United States, but forecasts of a slower-than-expected
recovery in global demand from the pandemic weighed.
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 54 basis points, about a basis point higher
than its close on Monday and well above its level of 33 basis
points reached on July 24.
The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up less than
a basis point at 0.139% in morning trading.

September 15 Tuesday 9:58AM New York / 1358 GMT



Price Current Net
Yield % Change
(bps)
Three-month bills 0.1075 0.109 0.004
Six-month bills 0.12 0.1217 0.009
Two-year note 99-249/256 0.139 0.002
Three-year note 99-228/256 0.1616 0.003
Five-year note 99-234/256 0.2675 0.007
Seven-year note 100-72/256 0.4589 0.007
10-year note 99-124/256 0.6789 0.010
20-year bond 98-128/256 1.21 0.015
30-year bond 98-200/256 1.4252 0.017

DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 8.25 0.50
spread
U.S. 3-year dollar swap 7.00 0.50
spread
U.S. 5-year dollar swap 5.75 -0.25
spread
U.S. 10-year dollar swap 0.50 0.00
spread
U.S. 30-year dollar swap -36.00 0.50
spread




(Reporting by Ross Kerber in Boston; Editing by Dan Grebler)

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