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TREASURIES-Yield curve flatter on coronavirus, election concerns

Credit: REUTERS/LEONHARD FOEGER

Longer-term U.S. Treasury yields fell on Monday and left the yield curve flatter as investors worried about a fast-rising case count in the COVID-19 pandemic and sized up a complicated battle for control of the U.S. Senate.

By Ross Kerber

Oct 26 (Reuters) - Longer-term U.S. Treasury yields fell on Monday and left the yield curve flatter as investors worried about a fast-rising case count in the COVID-19 pandemic and sized up a complicated battle for control of the U.S. Senate.

The benchmark 10-year US10YT=RR yield was down 2.7 basis points in morning trading at 0.8144%, well below its four-month high reached on Friday.

New infections touched record levels in the United States recently, with El Paso, Texas, asking citizens to stay at home for the next two weeks, while in Europe, Italy and Spain imposed new restrictions.

Traders now worry about additional lockdowns in the face of the pandemic that would slow economies, a story the U.S. Treasury market seemed to ignore for much of October, said Jim Vogel, interest rate strategist for FHN Financial.

He said investors also were taking note of the tight races that make it hard to predict which party will control the U.S. Senate in next month's elections and holding down Treasury yields.

"There's enough uncertainty with regards to how the Senate elections come out, it's easier to wait rather than sell Treasuries on the expectation of a certain outcome," Vogel said.

Democratic control, coupled with a predicted win for the party's presidential candidate Joe Biden, is generally expected to send markets higher on the expectation of an end to Washington gridlock, he said.

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 66 basis points, about 3 basis points lower than Friday's close.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was down less than a basis point at 0.1514% in morning trading.

October 26 Monday 9:13AM New York / 1313 GMT

Price

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.0925

0.0938

0.000

Six-month bills US6MT=RR

0.1125

0.1141

0.000

Two-year note US2YT=RR

99-243/256

0.1514

-0.004

Three-year note US3YT=RR

99-202/256

0.1963

-0.006

Five-year note US5YT=RR

99-122/256

0.3573

-0.013

Seven-year note US7YT=RR

98-148/256

0.5848

-0.018

10-year note US10YT=RR

98-56/256

0.8144

-0.027

20-year bond US20YT=RR

95-188/256

1.3717

-0.037

30-year bond US30YT=RR

94-128/256

1.608

-0.038

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

8.25

0.00

U.S. 3-year dollar swap spread

7.75

0.00

U.S. 5-year dollar swap spread

6.50

-0.25

U.S. 10-year dollar swap spread

2.75

0.25

U.S. 30-year dollar swap spread

-34.00

0.50

(Reporting by Ross Kerber in Boston Editing by Nick Zieminski)

((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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