(Updates with trading activity, 10-year note auction results) By Ross Kerber and Noel Randewich July 8 (Reuters) - The U.S. sold $29 billion worth of 10-year notes for the lowest high yield on record on Wednesday, indicating strong demand for the safe-haven securities despite a flood of new issuance to fund economic stimulus in response to the coronavirus pandemic. The high yield was 0.653% in the auction of the benchmark notes, the U.S. Treasury Department said. That compared to the previous high yield of 0.7% in May, and continuing a trend from Tuesday when 3-year notes also sold for the lowest high yield ever. Bids accepted from non-dealers accounted for 80.3% of the sale, compared with an average of 71.5%, according to a note from BMO Capital Markets. Following the auction, Treasury yields were stable for the session, with the 10-year yield was down less than a basis point at 0.6463%. Analysts said the auction showed investors were willing to look past rising U.S. deficits and the ongoing pandemic, perhaps because the securities still return more than the debt of other governments. "It was definitely an auction that was well received by primary market participants," said BMO Capital Markets rates strategist Ben Jeffery. “As the world’s preferred save haven assets, the structural demand for Treasuries is always going to be a natural outlet for those looking for safety, and even more with low or negative interest rates in Europe," he said. Wall Street edged higher in choppy trading, supported by technology shares as early signs of an economic rebound overrode fears of another lockdown due to a jump in coronavirus cases across the country. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 49 basis points, about a basis point higher than at its close on Tuesday and near its level since mid-June. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down less than a basis point at 0.1567% in afternoon trading. July 8 Wednesday 1:32PM New York / 1732 GMT Price Current Net Yield % Change (bps) Three-month bills 0.145 0.1475 0.000 Two-year note 99-240/256 0.1567 -0.008 Three-year note 99-212/256 0.1825 -0.008 Five-year note 99-206/256 0.2896 -0.003 Seven-year note 100-24/256 0.4863 0.000 10-year note 99-204/256 0.6463 -0.002 20-year bond 99-144/256 1.1497 -0.007 30-year bond 96-188/256 1.3839 -0.005 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 5.75 0.50 spread U.S. 3-year dollar swap 3.75 0.00 spread U.S. 5-year dollar swap 2.50 0.00 spread U.S. 10-year dollar swap -3.25 -0.25 spread (Reporting by Ross Kerber in Boston and by Noel Randewich in San Francisco. Editing by Nick Zieminski and Bernadette Baum)
Our Standards: The Thomson Reuters Trust Principles.