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TREASURIES-Yields fall as stocks drop for fourth straight day

Credit: REUTERS/DADO RUVIC

U.S. Treasury yields moved lower, but recovered from their worst levels of the day as a sell-off in equity markets continued from the prior week.

By Chuck Mikolajczak

Sept 21 (Reuters) - U.S. Treasury yields moved lower, but recovered from their worst levels of the dayas a sell-off in equity markets continued from the prior week.

Major averages on Wall Street dropped once again, with the S&P 500 .SPX on track for its fourth straight decline after touching its lowest level since July 31. Investors have become unnerved by a variety of concerns, including the possibility of new coronavirus-driven lockdowns, election uncertainty and the likelihood fresh fiscal stimulus will remain stalled. [nL3N2GI2PI]

The yield on 10-year Treasury notes US10YT=RR was down 2.8 basis points to 0.666%, after falling as low as 0.648% on the day.

"You had a little bit of curve steepening towards the end of last week but right now the attention for Treasuries seems to be on the stock market," said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania.

"It’s not just the weakness in stocks for today. It is the weakness we’ve seen in stocks over the past few days that is finally catching up to the bond investors."

The benchmark S&P index has dropped more than 4% since the U.S. Federal Reserve's policy announcement on Sept. 16 in which the central bank pledged to keep interest rates near zero until inflation is on track to modestly exceed a 2% target for some time.

On Monday, Dallas Federal Reserve President Robert Kaplan said the economy will likely need near-zero interest rates for the next two and a half or three years, but the central bank shouldn't lock itself into low borrowing costs beyond then.

The index now stands down more than 9% from its Sept. 2 closing high, moving closer to what is traditionally known as a "correction," or fall of 10%.

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 52.9 basis points, after falling as far as 51.2, its lowest level since Sept. 4 but still well above the recent low of 33 basis points on July 24.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 0.2 basis points to 0.137%.

September 21 Monday 2:35PM New York / 1835 GMT

Price

US T BONDS DEC0 UScv1

176-21/32

0-21/32

10YR TNotes DEC0 TYcv1

139-156/256

0-52/256

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.085

0.0862

-0.005

Six-month bills US6MT=RR

0.105

0.1065

-0.008

Two-year note US2YT=RR

99-250/256

0.1371

-0.002

Three-year note US3YT=RR

99-234/256

0.1539

-0.005

Five-year note US5YT=RR

99-236/256

0.2659

-0.013

Seven-year note US7YT=RR

100-84/256

0.4519

-0.021

10-year note US10YT=RR

99-156/256

0.6658

-0.028

20-year bond US20YT=RR

98-164/256

1.202

-0.030

30-year bond US30YT=RR

98-240/256

1.4187

-0.033

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

7.75

0.00

U.S. 3-year dollar swap spread

7.25

0.00

U.S. 5-year dollar swap spread

6.00

0.25

U.S. 10-year dollar swap spread

0.50

0.00

U.S. 30-year dollar swap spread

-36.50

0.00

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

((charles.mikolajczak@tr.com; @ChuckMik; Reuters Messaging: charles.mikolajczak.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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