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TREASURIES-Traders ready for note auctions, U.S. Fed guidance

Credit: REUTERS/AKHTAR SOOMRO

Stable U.S. Treasury yields on Monday showed traders preparing for a week that will include of a barrage of new supply and possible insight from the Federal Reserve on how it will support the economy.

By Ross Kerber

Aug 24 (Reuters) - Stable U.S. Treasury yields on Monday showed traders preparing for a week that will include of a barrage of new supply and possible insight from the Federal Reserveon how it will support the economy.

The benchmark 10-year US10YT=RR yield was up less than a basis point at 0.6493% in afternoon trading.

The yield was roughly in the middle of the range where the 10-year note has traded since late March and indicated investors were looking ahead to auctions of $148 billion worth of 2-year, 5-year and 7-year notes starting on Tuesday said Ben Jeffery, BMO Capital Markets rates strategist.

Remarks from Federal Reserve Chairman Jerome Powell scheduled for Thursday could shed light on the U.S. central bank's next steps to promote an economic recovery.

"People are probably just squaring positions ahead of the more consequential events later this week," Jeffery said.

Jack McIntyre, fixed income portfolio manager for Brandywine Global Investment Management, said despite the upcoming auctions, U.S. Treasury yields will likely stay close to current levels until the Fed provides more clarity about its intentions.

"My view is that the supply doesn't change the trend in the bond market. I think yields are going to be rangebound," he said.

U.S. Republicans formally backed President Donald Trump's re-election bid on the first of four days of a scaled-back party convention in Charlotte, North Carolina. Party members are meeting amid a coronavirus pandemic that has killed more than 176,000 Americans, erased millions of jobs and eroded the president's standing among voters.

Wall Street gained on Monday, setting the S&P 500 and the Nasdaq on track for record closing highs as optimism over potential medical advances to fight the pandemic helped keep investors in a buying mood.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, US2US10=RR seen as an indicator of economic expectations, was at 49 basis points, a basis point above Friday's close and well above its recent low of 33 basis points reached on July 24.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 0.1554% in afternoon trading.

August 24 Monday 2:22PM New York / 1822 GMT

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.0925

0.0938

-0.002

Six-month bills US6MT=RR

0.115

0.1167

-0.002

Two-year note US2YT=RR

99-241/256

0.1554

0.008

Three-year note US3YT=RR

99-216/256

0.1777

0.011

Five-year note US5YT=RR

99-218/256

0.2803

0.008

Seven-year note US7YT=RR

99-104/256

0.4621

0.007

10-year note US10YT=RR

99-196/256

0.6493

0.009

20-year bond US20YT=RR

99-204/256

1.1364

0.005

30-year bond US30YT=RR

100-140/256

1.3527

0.000

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

6.50

-0.75

U.S. 3-year dollar swap spread

5.75

-0.75

U.S. 5-year dollar swap spread

4.25

-0.75

U.S. 10-year dollar swap spread

-1.25

-1.00

U.S. 30-year dollar swap spread

-38.25

-0.25

(Reporting by Ross Kerber in Boston; Editing by Will Dunham and Leslie Adler)

((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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