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TREASURIES-Yield higher after soft 10-year auction

Wed, 9th Sep 2020 20:15

(Adds 10-year auction results, quote, updates prices)
By Karen Brettell
NEW YORK, Sept 9 (Reuters) - U.S. Treasury yields rose on
Wednesday after the government sold $35 billion in 10-year notes
to slightly soft demand, and ahead of a 30-year bond auction on
Thursday.
The 10-year notes sold at a high yield of 0.704%, around one
basis point higher than where the debt traded before the
auction.
“The auction was a little weaker than expected,” said Justin
Lederer, an interest rate strategist at Cantor Fitzgerald in New
York. “I’m not completely surprised by the tail just given some
of the short base, there was a lot of short covering that went
on and that took away some of the bid.”
Treasury yields have been choppy as investors weigh equity
volatility, which has boosted demand for the safe-haven debt,
against heavy debt supply.
But benchmark 10-year notes have for the most part held in a
tight range since the beginning of April as the Federal Reserve
keeps interest rates zero bound and continues its bond
purchases.
The yield rose 2 basis points to 0.703% on
Wednesday.
The Treasury has been increasing the size of its auctions
across the curve as it pays for stimulus meant to boost the
economy after coronavirus lockdowns.
The next focus will be the Treasury’s sale of $23 billion in
30-year bonds on Thursday, after the government saw weak demand
for a record-large sale of the bonds at its August refunding.
The sale is up from $19 billion at July's reopening but below
the $26 billion sold last month.
The Treasury on Thursday will also announce the size of its
20-year bond auction scheduled for next week.
Another major focus is whether the U.S. Congress is likely
to pass new stimulus to boost the economy after the spread of
the novel coronavirus closed businesses across the country.
If new spending is not imminent it could boost demand for
Treasuries, as the threat of further increases in supply in the
near term would ease. At the same time, concerns about further
economic weakness would grow.
“That is 1-1.5 trillion dollars of supply that won’t hit the
market, and that’s quite a bit of fiscal drag as well,” said
Gennadiy Goldberg, an interest rate strategist at TD Securities
in New York.
U.S. Senate Republican and Democratic leaders on Wednesday
held to their radically different positions on what is needed to
address the continuing fallout from the coronavirus pandemic,
one day before a vote on a modest Republican bill that appeared
destined for defeat.


September 9 Wednesday 3:00PM New York / 1900 GMT
Price
US T BONDS DEC0 175-22/32 -0-19/32
10YR TNotes DEC0 139-68/256 -0-32/25
6
Price Current Net
Yield % Change
(bps)
Three-month bills 0.11 0.1116 -0.007
Six-month bills 0.125 0.1268 -0.002
Two-year note 99-246/256 0.1449 0.004
Three-year note 99-220/256 0.172 0.001
Five-year note 99-220/256 0.2785 0.006
Seven-year note 100-32/256 0.4817 0.013
10-year note 99-64/256 0.7033 0.019
20-year bond 97-208/256 1.2493 0.035
30-year bond 97-244/256 1.4596 0.037

DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 8.25 0.00
spread
U.S. 3-year dollar swap 6.75 -0.25
spread
U.S. 5-year dollar swap 6.00 0.00
spread
U.S. 10-year dollar swap 0.25 0.25
spread
U.S. 30-year dollar swap -38.00 0.25
spread







(Reporting by Karen Brettell; Editing by Nick Zieminski and
Leslie Adler)

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