US Markets

TREASURIES-Yields bounce back after strong demand for notes at auction

Credit: REUTERS/DADO RUVIC

U.S. Treasury yields rose back after declines on Monday as investors showed continued demand for notes at auction and prepared for a dovish message from the U.S. Federal Reserve later this week.

By Ross Kerber

July 27 (Reuters) - U.S. Treasury yields rose back after declines on Monday as investors showed continued demand for notes at auction and prepared for a dovish message from the U.S. Federal Reserve later this week.

The benchmark 10-year US10YT=RR yield was up one basis point at 0.5987% in afternoon trading after reaching as low at 0.569% earlier in the session.

Midday auction results showed the U.S. Treasury sold $48 billion of 2-year notes at a high yield of 0.155%, and sold $49 billion of 5-year notes at a high yield of 0.288%.

For each note, the auction result was the lowest on record even as the amounts sold were the largest, said BMO Capital Markets rates strategist Ben Jeffery. The outcomes showed solid demand for the securities as Washington leaders try to finish a new aid plan with jobless benefits set to expire amid the COVID-19 pandemic.

"The fact that these auctions are still met with solid demand, even at such a low yield, is encouraging," he said. "It means there is still more space for issuance increases if needed."

No major announcements are expected at the end of the U.S. central bank's two-day meeting on Wednesday. But analysts foresee policymakers laying the groundwork for weak economic expectations and more dovish action later this year.

Investors bought up other safe- haven assets on Monday as Sino-U.S. tensions rose and coronavirus cases climbed in southern and western U.S. states. Gold prices soared to an all-time high on Monday while the U.S. dollar fell.

Yields on 10-year inflation-protected U.S. Treasury bonds US10YTIP=RR were at minus 0.913%, on track for a record closing low.

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 44 basis points, roughly unchanged since Friday's close.

July 27 Monday 1:55PM New York / 1755 GMT

Price

US T BONDS SEP0 UScv1

180-31/32

-0-4/32

10YR TNotes SEP0 TYcv1

139-128/256

-0-20/256

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.1025

0.1039

-0.005

Six-month bills US6MT=RR

0.13

0.1319

-0.002

Two-year note US2YT=RR

99-241/256

0.1555

0.006

Three-year note US3YT=RR

99-214/256

0.1805

0.010

Five-year note US5YT=RR

99-216/256

0.282

0.008

Seven-year note US7YT=RR

100-84/256

0.4518

0.007

10-year note US10YT=RR

100-64/256

0.5987

0.010

20-year bond US20YT=RR

101-208/256

1.0236

0.000

30-year bond US30YT=RR

100-92/256

1.2355

-0.003

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

6.25

0.25

U.S. 3-year dollar swap spread

4.75

0.00

U.S. 5-year dollar swap spread

3.25

0.25

U.S. 10-year dollar swap spread

-0.75

0.25

U.S. 30-year dollar swap spread

-41.00

1.00

US Treasuries yield curvehttps://tmsnrt.rs/303jJ8f

Gold soars, dollar dipshttps://tmsnrt.rs/2P4Uqw5

(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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