US Markets

TREASURIES-Yields edge up as safe-haven buying sputters

Credit: REUTERS/THOMAS WHITE

U.S. Treasury yields edged higher on Thursday, changing direction after an earlier safe-haven rally sparked when jobless claims notched an unexpected climb.

By Karen Pierog

CHICAGO, Oct 15 (Reuters) - U.S. Treasury yields edged higher on Thursday, changing direction after an earlier safe-haven rally sparked when jobless claims notched an unexpected climb.

The benchmark 10-year US10YT=RR yield was last 0.7306%.

Guy LeBas, chief fixed income strategist at Janney Capital Management in Philadelphia, said the session's earlier risk-on tone switched to risk off as Wall Street pared losses.

"You see it in the pretty substantial reversal after a big morning rally in Treasuries," he said.

Yields on the longer end of the curve dropped to session lows after the U.S. Labor Department reported initial claims for state unemployment benefits totaled a seasonally adjusted 898,000 for the week ended Oct. 10, compared to 845,000 in the prior week. Economists polled by Reuters had forecast 825,000 applications in the latest week.

Tony Rodriguez, head of fixed income strategy at Nuveen, said the global rise in virus cases and a lack of more fiscal aid for the U.S. economy were center stage in the market.

"Both of those being obviously negative for near-term growth," he said.

On the stimulus front, President Donald Trump said on he was willing to raise his offer of $1.8 trillion to win support of Congressional Democrats. Trump's fellow Republican, Senate Majority Leader Mitch McConnell, said an aid package would be passed eventually, but the president's latest offer would be a tough sell to his members.

The coming week will bring more supply to the market, with $22 billion of 20-year bonds set for auction on Oct. 21 and $17 billion of Treasury Inflation-Protected Securities (TIPS) selling on Oct. 22.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was at 0.1370%, vs 0.1390% late Wednesday.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=TWEB, which is viewed as an indicator of economic expectations, was last at 57.2 basis points, down from Wednesday's close.

October 15 Thursday 3:33PM New York / 1933 GMT

Price

US T BONDS DEC0 UScv1

175-2/32

-0-10/32

10YR TNotes DEC0 TYcv1

139-24/256

-0-32/256

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.1025

0.104

-0.002

Six-month bills US6MT=RR

0.1175

0.1192

0.002

Two-year note US2YT=RR

99-248/256

0.141

0.002

Three-year note US3YT=RR

99-214/256

0.1799

0.005

Five-year note US5YT=RR

99-174/256

0.3152

0.013

Seven-year note US7YT=RR

99-2/256

0.5204

0.016

10-year note US10YT=RR

98-240/256

0.7372

0.015

20-year bond US20YT=RR

97-32/256

1.2897

0.017

30-year bond US30YT=RR

96-148/256

1.518

0.019

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

9.00

0.00

U.S. 3-year dollar swap spread

8.50

0.00

U.S. 5-year dollar swap spread

8.00

0.50

U.S. 10-year dollar swap spread

3.50

0.25

U.S. 30-year dollar swap spread

-34.25

-0.50

(Reporting by Karen Pierog; Editing by Bernadette Baum and David Gregorio)

((karen.pierog@thomsonreuters.com; +1 312 408 8647; Reuters Messaging: karen.pierog.thomsonreuters.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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