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TREASURIES-Yields dip, but stay elevated after record week of supply

Fri, 14th Aug 2020 14:50

By Karen Brettell
NEW YORK, Aug 14 (Reuters) - Benchmark U.S. Treasury yields
dropped from seven-week highs on Friday but remained relatively
elevated, after the Treasury on Thursday completed $112 billion
in record coupon-bearing supply that has put pressure on bonds
all week.
The Treasury saw weak demand for a record $26 billion sale
of 30-year bonds on Thursday. It came after a record $48 billion
sale of three-year notes on Tuesday and a record $38 billion
sale of 10-year notes on Wednesday went well.
“The main story this week was the three Treasury auctions,”
said John Roberts, an interest rate strategist at NatWest
Markets in Stamford, Connecticut. “What’s keeping (yields)
elevated now is we had a poor 30-year auction and we’re getting
$25 billion 20-years next week. I think people might want to
wait around to see how that goes.”
The Treasury last week increased auction sizes across the
curve and said that it plans to continue to shift more of its
funding to longer-dated debt in coming quarters as it finances
measures to offset the impact of the coronavirus epidemic.

Benchmark 10-year note yields fell one basis
point to 0.705%, after reaching 0.727% on Thursday, the highest
since June 24.
Thirty-year bond yields <US30YT-RR> were little changed on
the day at 1.426%, after reaching 1.444% on Thursday, the
highest since July 7.
Technical analysts at JPMorgan noted that 30-year bond
yields are sitting near a support area from 1.365% to 1.405%,
which includes their 50- and 100-day moving averages and some
momentum thresholds.
“Sustained weakness through that support sustains a firm
bearish bias,” they said in a report sent on Thursday, noting
the next supports would be from 1.50% to 1.58%. "We believe the
current move has scope to at least those levels," the analysts
Bonds had little reaction to data showing that U.S. retail
sales in July increased less than expected.
A larger concern will be data for August, after tens of
millions of unemployed people lost a $600 weekly jobless benefit
supplement at the end of July, which had accounted for 20% of
personal income. President Donald Trump on Saturday signed
several executive orders, including one extending the
supplement, though he reduced the weekly federal payout to $300.
“I think people will be more worried about August retail
sales more than today’s print,” Roberts said.

August 14 Friday 9:36AM New York / 1336 GMT
US T BONDS SEP0 178-2/32 0-8/32
10YR TNotes SEP0 139-28/256 0-36/256
Price Current Net
Yield % Change
Three-month bills 0.0975 0.0989 0.000
Six-month bills 0.1175 0.1192 -0.003
Two-year note 99-241/256 0.155 -0.010
Three-year note 99-208/256 0.1878 -0.013
Five-year note 99-188/256 0.3041 -0.014
Seven-year note 99-24/256 0.5078 -0.013
10-year note 99-60/256 0.7045 -0.012
20-year bond 98-240/256 1.1855 -0.008
30-year bond 98-192/256 1.4264 -0.002

Last (bps) Net
U.S. 2-year dollar swap 8.25 0.75
U.S. 3-year dollar swap 6.50 0.75
U.S. 5-year dollar swap 4.75 0.75
U.S. 10-year dollar swap -1.75 0.75
U.S. 30-year dollar swap -40.75 0.75

(Reporting by Karen Brettell; editing by Jonathan Oatis)

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