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TREASURIES-Yields lower on stimulus deal doubts, more infections

Credit: REUTERS/DADO RUVIC

U.S. Treasury yields fell on Tuesday and the yield curve was flatter as hopes faded for an imminent stimulus deal in Washington, while coronavirus infections surged.

By Ross Kerber

Oct 27 (Reuters) - U.S. Treasury yields fell on Tuesday and the yield curve was flatter as hopes faded for an imminent stimulus deal in Washington, while coronavirus infections surged.

The benchmark 10-year US10YT=RR yield was down 2.7 basis points in afternoon trading at 0.776%.

President Donald Trump acknowledged that a coronavirus economic relief deal would likely come after the Nov. 3 election, with the White House unable to bridge differences with fellow Republicans in the U.S. Senate as well as congressional Democrats.

Major U.S. stock indexes extended declines from Monday as investors parsed through corporate earnings, took stock of rising coronavirus cases, and braced for volatility.

Treasury yields started falling early Tuesday as equity prices rose, a trend that usually prompts a shift out of safe-haven government bonds.

But policy factors seemed to play a bigger role, said Eric Jussaume, director of fixed income for Cambridge Trust. "The market wants some sort of stimulus. It's not getting it yet."

The U.S Treasury sold $54 billion worth of 2-year notes in an auction whose results essentially matched market demand. Bids from primary dealers accounted for 32% of accepted bids, compared to 31.9% on average, according to a note from Ben Jeffery of BMO Capital Markets.

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 63 basis points, about 3 basis points lower than Monday's close and its lowest since Oct. 20.

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

October 27 Tuesday 2:41PM New York / 1841 GMT

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.095

0.0966

-0.002

Six-month bills US6MT=RR

0.105

0.1065

-0.006

Two-year note US2YT=RR

99-244/256

0.1494

0.000

Three-year note US3YT=RR

99-210/256

0.1858

-0.005

Five-year note US5YT=RR

99-152/256

0.3333

-0.016

Seven-year note US7YT=RR

98-208/256

0.55

-0.023

10-year note US10YT=RR

98-148/256

0.776

-0.027

20-year bond US20YT=RR

96-112/256

1.3302

-0.030

30-year bond US30YT=RR

95-120/256

1.5658

-0.028

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

2.50

0.00

U.S. 30-year dollar swap spread

-34.25

-0.25

(Reporting by Ross Kerber in Boston Editing by Nick Zieminski, Jonathan Oatis and Richard Chang)

((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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