US Markets

TREASURIES-Yields fall, record-low auction yield for 10-year TIPS

Credit: REUTERS/DADO RUVIC

U.S. Treasury yields on the longer end of the yield curve drifted lower on Thursday as stocks fell and the auction yield for 10-year Treasury-Inflation Protected Securities (TIPS) hit an all-time low.

By Karen Pierog

CHICAGO, July 23 (Reuters) - U.S. Treasury yields on the longer end of the yield curve drifted lower on Thursday as stocks fell and the auction yield for 10-year Treasury-Inflation Protected Securities (TIPS) hit an all-time low.

The benchmark 10-year US10YT=RR yield ended the U.S. trading session at 0.5774%, the lowest close since April 21.

The $14 billion of 10-year TIPS were sold at -0.930%, the lowest yield ever in an auction of that security. TIPS yields are equal to relevant Treasury yields minus expected annual inflation, making them a market indicator of real interest rates.

The bid-to-cover ratio, a metric of overall demand, was 2.24.

The auction went "pretty well," according to Tom Simons, a money market economist at Jefferies in New York. "The direct bid was a little soft, which is not all that unusual in recent times," he said, noting there was a strong take-down on the indirect bid side.

A rush into TIPS has pushed yields to near historic lows amid an uptick in inflation expectations. The 10-year TIPS yield was last at -0.881% US10YTIP=TWEB.

"With the amount of stimulus that's out there, it's hard to believe that there's not some inflation that's going to come out of this," said John Mousseau, president and CEO of Cumberland Advisors.

The latest weekly jobless claims data, which showed initial claims rising for the first time since late March, did little to jar the market, which was closely following ongoing talks in Washington over the next round of aid to combat the economic fallout from the coronavirus pandemic.

"We're waiting for more direction on what's going on with potential stimulus. We get bits and pieces of headlines here and there that's not helpful for the market finding direction," Simons 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=TWEB, viewed as an indicator of economic expectations, closed at 42.57 basis points, the flattest since April 28.

July 23 Thursday 3:55PM New York / 2055 GMT

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.1175

0.1192

-0.003

Six-month bills US6MT=RR

0.135

0.137

0.005

Two-year note US2YT=RR

99-242/256

0.1533

0.006

Three-year note US3YT=RR

99-218/256

0.175

0.005

Five-year note US5YT=RR

99-232/256

0.2691

0.000

Seven-year note US7YT=RR

100-108/256

0.4382

-0.009

10-year note US10YT=RR

100-112/256

0.579

-0.016

20-year bond US20YT=RR

101-252/256

1.0142

-0.050

30-year bond US30YT=RR

100-120/256

1.2311

-0.059

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

5.50

-0.75

U.S. 3-year dollar swap spread

4.00

-0.75

U.S. 5-year dollar swap spread

3.25

0.00

U.S. 10-year dollar swap spread

-1.25

0.75

U.S. 30-year dollar swap spread

-43.25

3.25

(By Karen Pierog; Editing by Cynthia Osterman and Dan Grebler)

((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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