US Markets

TREASURIES-Yields lower on stimulus deal doubts

Credit: REUTERS/DADO RUVIC

U.S. Treasury yields fell on Tuesday and the yield curve was flatter as hopes faded for a stimulus deal in Washington to arrive soon.

By Ross Kerber

Oct 27 (Reuters) - U.S. Treasury yields fell on Tuesday and the yield curve was flatter as hopes faded for a stimulus deal in Washington to arrive soon.

The benchmark 10-year US10YT=RR yield was down 1.5 basis points in morning trading at 0.7877%.

The White House said on Tuesday a potential deal on COVID-19 relief could come in "weeks," casting doubt on whether an accord could be struck with Congress before the Nov. 3 election even as U.S. cases of the disease have swelled.

The S&P 500 and the Nasdaq opened slightly higher on Tuesday following the benchmark index's worst day in a month as investors parsed through corporate earnings, while bracing for volatility in the run up to the presidential election.

Higher equity prices generally move investors out of safer Treasuries. But policy factors seemed to play a bigger role in Tuesday's government bond trading, said Eric Jussaume, director of fixed income for Cambridge Trust.

"The market wants some sort of stimulus. It's not getting it yet," he said. Traders also seemed to be buying up Treasuries in anticipation of more volatility tied to voting, he said.

Euro zone bond yields also dipped on concerns about rising coronavirus case counts and a lack of progress on U.S. stimulus talks.

New orders for key U.S.-made capital goods rose more than expected in September, wrapping up a quarter of potentially record growth in business spending and the economy, thanks to previous fiscal stimulus deals.

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 64 basis points, about 2 basis points lower than Monday's close and its lowest since Oct. 20.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was unchanged at 0.1494% in morning trading.

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.095

0.0966

-0.002

Six-month bills US6MT=RR

0.11

0.1116

0.000

Two-year note US2YT=RR

99-244/256

0.1494

0.000

Three-year note US3YT=RR

99-208/256

0.1885

-0.002

Five-year note US5YT=RR

99-144/256

0.3397

-0.009

Seven-year note US7YT=RR

98-192/256

0.5593

-0.014

10-year note US10YT=RR

98-120/256

0.7877

-0.015

20-year bond US20YT=RR

96-64/256

1.3413

-0.019

30-year bond US30YT=RR

95-52/256

1.5774

-0.017

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

8.50

0.00

U.S. 3-year dollar swap spread

8.00

0.25

U.S. 5-year dollar swap spread

6.75

0.00

U.S. 10-year dollar swap spread

2.75

0.25

U.S. 30-year dollar swap spread

-34.00

0.00

(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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