US Markets

TREASURIES-Yields rise as Trump boosts stimulus hopes

Credit: REUTERS/THOMAS WHITE

U.S. Treasury yields rose to the top end of their months-long range on Tuesday on hopes that U.S. lawmakers will pass new stimulus, as U.S. President Donald Trump said he supports a “bigger” deal.

By Karen Brettell

NEW YORK, Oct 20 (Reuters) - U.S. Treasury yields rose to the top end of their months-long range on Tuesday on hopes that U.S. lawmakers will pass new stimulus, as U.S. President Donald Trump said he supports a “bigger” deal.

Trump predicted on Tuesday that his fellow Republicans in the U.S. Senate would go along if the White House reaches a coronavirus relief deal with Democratic House Speaker Nancy Pelosi, despite many senators' stated opposition to any large stimulus package.

"I want to do it even bigger than the Democrats," Trump said in an interview with Fox News. "Not every Republican agrees with me, but they will."

U.S. Senate Republicans are preparing to bring up legislation on Tuesday to replenish a program that helps small businesses slammed by the coronavirus, as Pelosi and Treasury Secretary Steve Mnuchin discuss a larger stimulus package.

“It seems like the most recent move higher in yields came as we got these headlines from Trump saying that he wants to go bigger than the Democrats, and that he could get (U.S. Senate Majority Leader Mitch) McConnell on board if there is a deal,” said Tom Simons, a money market economist at Jefferies in New York.

“The market has really been beholden to these on and off again headlines about a Phase 4 deal for weeks now,” Simons said.

Benchmark 10-year note yields US10YT=RR were last up three basis points higher on the day at 0.791%. The yields have traded in a tight range from 0.50% to 0.80% since April, with the exception of a brief spike to 0.96% in early June.

Some investors are betting long-dated yields will rise after the Nov. 3 presidential election on the likelihood of greater fiscal spending to boost the economy, with Democrats expected to support a larger package if they win a majority in the Senate.

New government spending should improve the economic outlook but also increase Treasury supply.

Ongoing weakness from Covid-related business disruptions, however, is likely to keep downward pressure on yields with the Federal Reserve also likely to act to keep rates near historical lows unless the economy shows improvement.

The Treasury Department will sell $22 billion in 20-year bonds on Wednesday and $17 billion in five-year Treasury Inflation-Protected Securities (TIPS) on Thursday.

Data on Tuesday showed that U.S. homebuilding rebounded in September and that the Philadelphia Federal Reserve’s non-manufacturing business conditions index rose in October.

October 20 Tuesday 9:16AM New York / 1316 GMT

Price

US T BONDS DEC0 UScv1

173-24/32

-0-24/32

10YR TNotes DEC0 TYcv1

138-188/256

-0-48/256

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.1

0.1014

0.000

Six-month bills US6MT=RR

0.115

0.1167

0.000

Two-year note US2YT=RR

99-244/256

0.1492

0.002

Three-year note US3YT=RR

99-204/256

0.1933

0.005

Five-year note US5YT=RR

99-140/256

0.3425

0.012

Seven-year note US7YT=RR

98-188/256

0.5611

0.021

10-year note US10YT=RR

98-112/256

0.7907

0.029

20-year bond US20YT=RR

96-24/256

1.3503

0.036

30-year bond US30YT=RR

95-8/256

1.5847

0.037

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

8.25

0.00

U.S. 5-year dollar swap spread

7.75

0.00

U.S. 10-year dollar swap spread

2.50

-0.50

U.S. 30-year dollar swap spread

-35.75

-0.75

(Editing by Nick Zieminski)

((karen.brettell@thomsonreuters.com))

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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