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Bonds News

TREASURIES-U.S. Treasury yields hit fresh 5-month lows

 (Updates prices and commentary)
    By Herbert Lash and Sujata Rao
    NEW YORK/LONDON, July 20 (Reuters) - Yields on 10-year
Treasuries rebounded from new five-month lows on Tuesday after
the previous session's biggest single-day decline since
February, as traders scrambled to hedge against the unexpected
rally in the U.S. bond benchmark.
    The yield on 10-year Treasury notes rose 1.8
basis points to 1.199%, a reversal from a low of 1.128% earlier
in the session. 
    The yield on the 30-year Treasury bond  gained
3.8 basis points to 1.853%.        
     What appeared to be short covering in mid-curve Eurodollars
pulled long end yields lower, said Guy LeBas, chief fixed income
strategist at Janney Montgomery Scott LLC. 
    "In that sense, there's not so much of a fundamental driver
on 10-year yields, but rather a trading one," LeBas said.
    Trading was volatile, as the 10-year yield overnight rose to
nearly 1.22%. 
    The decline in yields on Monday came as rising COVID-19
infections globally sparked concerns bout the economic outlook
and sent investors seeking safety in U.S. and German bonds,
despite relatively robust economic data and corporate earnings.
    "Equity markets were pricing an explosion of growth and
margins over the next two to three years and it's clear now we
won't have that," said Ludovic Colin, senior portfolio manager
at Vontobel Asset Management.
    Colin said however bond markets appeared too pessimistic in
starting to price recession. 
    "We don't think we will have recession, just long-term
growth that wont be as beautiful as what was expected by
investors in January-March period."
    The downward move has been led by the longer end of the
market, flattening the yield curve significantly. Reflecting the
growth concerns, the gap between two-year and 10-year yields
remains below 100 basis points, having been at 122 bps at the
start of July.
    Thirty-year yields which had risen almost four bps earlier
in the day, slipped back to 1.80%, though stayed off end-January
lows touched on Monday.
    The reversal on Treasuries boosted euro zone bonds too, with
10-year German yields extending their fall. They were last down
3 bps at minus 0.42%
    Inflation-adjusted 10-year yields inched to minus 1.10%, not
far off the record lows around minus 1.113% last touched in
January.   
    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 99.7 basis points. 
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 1 basis
points at 0.200%. 
    The breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) was last at
2.443%.
    The 10-year TIPS breakeven rate was last at
2.269%, indicating the market sees inflation averaging about
2.3%a year for the next decade.

  July 20 Tuesday 10:56AM New York / 1456 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.05         0.0507    0.000
 Six-month bills               !Empty       !Empty    !Empty
                               value        value     value
 Two-year note                 99-219/256   0.1996    -0.010
 Three-year note               100-8/256    0.3644    -0.014
 Five-year note                100-244/256  0.6786    -0.011
 Seven-year note               101-232/256  0.9654    0.001
 10-year note                  103-240/256  1.1986    0.018
 20-year bond                  107-236/256  1.7741    0.039
 30-year bond                  111-236/256  1.8528    0.038
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.00         1.00    
 spread                                               
 U.S. 3-year dollar swap         9.25         0.50    
 spread                                               
 U.S. 5-year dollar swap         6.75         0.75    
 spread                                               
 U.S. 10-year dollar swap       -2.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -32.25        -0.75    
 spread (Reporting by Sujata Rao; editing by Yoruk Bahceli and Nick
Zieminski)
  
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