US Markets

TREASURIES-Longer-term yields rise, steepen yield curve

Credit: REUTERS/REGIS DUVIGNAU

Longer-term U.S. Treasury yields rose off near-record lows on Friday, but caution held back shorter-term rates and steepened the yield curve as talks in Washington on a new coronavirus aid bill continued.

By Ross Kerber

July 31 (Reuters) - Longer-term U.S. Treasury yields rose off near-record lows on Friday, but caution held back shorter-term rates and steepened the yield curve as talks in Washington on a new coronavirus aid bill continued.

The benchmark 10-year US10YT=RR yield was up 1.3 basis points at 0.5543% in afternoon trading after reaching as low as 52 basis points, the least since March.

The gap between yields on two- and 10-year Treasury notes, US2US10=RR seen as an indicator of economic expectations, was at 43 basis points, about a basis point above Thursday's close and well above the 40 basis point level it touched earlier Friday.

Stock indexes had opened higher based on strong earnings from top technology companies, then fell on continuing economic concerns.

In Washington, negotiations over another coronavirus relief bill continued and U.S. House of Representatives Speaker Nancy Pelosi said talks with the White House were not yet on a path toward reaching a deal, hours before the expiration of federal unemployment benefits.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was almost unchanged at 0.1172% and remained close to its all-time low of 0.105% reached on May 8.

The economy as a whole is unlikely to improve until public health issues stemming from the COVID-19 pandemic are resolved, said Raymond James market strategist Ellis Phifer. Early signs of an economic comeback proved premature as virus cases have continued rise and kept people at home.

"That's bad for the economy since we're consumer driven," Phifer said.

The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 5.6% last month after a record 8.5% jump in May as more businesses reopened.

The data was included in Thursday's advance gross domestic product report for the second quarter, which showed the economy shrinking at a record 32.9% annualized rate as consumer spending tanked at a historic 34.6% pace.

The United States leads the world in COVID-related fatalities with more than 150,000 in five months.

July 31 Friday 1:55PM New York / 1755 GMT

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.0925

0.0938

-0.002

Six-month bills US6MT=RR

0.1025

0.1043

0.000

Two-year note US2YT=RR

100-4/256

0.1172

-0.004

DThree-year note US3YT=RR

99-254/256

0.1277

-0.008

Five-year note US5YT=RR

100-30/256

0.2264

-0.004

Seven-year note US7YT=RR

99-204/256

0.4045

0.004

10-year note US10YT=RR

100-172/256

0.5543

0.013

20-year bond US20YT=RR

102-80/256

0.9959

0.022

30-year bond US30YT=RR

100-200/256

1.2186

0.022

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

7.00

0.50

U.S. 3-year dollar swap spread

6.00

0.50

U.S. 5-year dollar swap spread

4.25

0.50

U.S. 10-year dollar swap spread

-1.00

0.00

U.S. 30-year dollar swap spread

-42.75

-1.00

US Yield Curvehttps://tmsnrt.rs/3gioa4T

(Reporting by Ross Kerber in Boston Editing by Nick Zieminski and Cynthia Osterman)

((ross.kerber@thomsonreuters.com; (617) 856 4341; Reuters Messaging: Ross.Kerber.Reuters.com@Reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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