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Bonds News

TREASURIES-Longer-term yields soar, 30-year TIPS yield turns positive

 (Recasts, updates yields, adds analyst comments)
    By Karen Pierog
    CHICAGO, Feb 19 (Reuters) - U.S. Treasury yields on the
longer end of the curve rose to new one-year highs on Friday as
Congress was poised to act on a massive fiscal stimulus package,
while the yield on 30-year inflation-protected securities (TIPS)
turned positive for the first time since June.
    The benchmark 10-year yield reached its highest
level since Feb. 26, 2020 at 1.363%. It was last up 5.8 basis
points at 1.3448%.
     The 30-year Treasury yield reached a fresh
one-year high of 2.155%. It was last 6.3 basis points higher at
2.1386%. 
    The approximately 14-basis-point rise in 10- and 30-year 
yields this week was the biggest since the week that ended Jan.
8.
    In a letter on Friday to the U.S. Senate Democratic Caucus, 
Senate Majority Leader Chuck Schumer said a $1.9 trillion
stimulus package to aid the coronavirus-battered economy was on
track to be sent to President Joe Biden before March 14.
    "The bond market's trying to reprice the fact that the
Treasury is going to borrow more money to pay for the stimulus
package," said Tom di Galoma, a managing director at Seaport
Global Holdings in New York.
    New York Federal Reserve Bank President John Williams said
on Friday that he is not worried that too much government
spending could overheat the U.S. economy. 
    Di Galoma said that comment and a rise in European bond
yields were also contributing to the upward momentum in Treasury
yields. 
     Meanwhile, the 30-year TIPS yield, which had
been in negative territory since June, surpassed the 0% mark,
rising after a weak auction of $9 billion of the securities on
Thursday. It was last at 0.029%.
    "It's hard to build a fundamental case for 30-year TIPS
yields to be negative ever," said Jim Vogel, senior rates
strategist at FHN Financial in Memphis, Tennessee. "Over 30
years, that's a lot of Fed accommodation for a long time." 
    The 10-year TIPS yield also rose to its
highest level since November. It was last at -0.807%.
    The two-year Treasury yield, which typically
moves in step with interest rate expectations, was last
unchanged at 0.1088%. It fell to 0.105% on Thursday, matching a
record low reached on Feb. 8.
   A closely watched part of the yield curve, which measures the
gap between yields on two- and 10-year Treasury notes
 was at its widest since February 2017. It was last
about 4.90 basis points higher at 123.43 basis points. 
   Looking ahead to next week, the Treasury Department will
auction $60 billion of two-year notes on Tuesday, $61 billion of
five-year notes on Wednesday and $62 billion of seven-year notes
on Thursday.
    "Five-year supply should be absorbed, (two-year notes) will
go away and aren't really supply and (seven-year notes) will be
the big question mark," Vogel said, pointing to concern over
whether the seven-year note action can clear below 1%.
    
   February 19 Friday 2:50PM New York / 2050 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0325       0.033     -0.005
 Six-month bills               0.04         0.0406    0.000
 Two-year note                 100-8/256    0.1088    0.000
 Three-year note               99-188/256   0.2144    0.010
 Five-year note                99           0.5807    0.033
 Seven-year note               98-122/256   0.9776    0.049
 10-year note                  97-244/256   1.3448    0.058
 20-year bond                  98-80/256    1.9777    0.065
 30-year bond                  94-48/256    2.1386    0.063
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.25         0.25    
 spread                                               
 U.S. 3-year dollar swap        10.50         0.50    
 spread                                               
 U.S. 5-year dollar swap        13.00         0.75    
 spread                                               
 U.S. 10-year dollar swap        8.50         1.00    
 spread                                               
 U.S. 30-year dollar swap      -21.25         0.00    
 spread (
Reporting by Karen Pierog; Editing by David Gregorio and Cynthia
Osterman)
  
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