March 12, 2020 / 8:04 PM / 22 days ago

TREASURIES-U.S. Treasury yields rise as Fed adds liquidity

 (Recasts, updates yields, adds New York Fed announcement,
analyst comment)
    By Karen Pierog
    CHICAGO, March 12 - Longer-dated U.S. Treasury yields rose
on Thursday after the New York Federal Reserve took dramatic
steps to boost liquidity in the banking system, in an attempt to
address liquidity concerns in the Treasury market.
    The 10-year note yield was last at 0.882%, up
from 0.822% at Wednesday's close.
    The New York Fed went into overdrive to address market
conditions. After raising repurchase agreement (repo) operation
limits twice since Monday, it announced on Thursday $1.5
trillion in new repo operations for this week.
 The moves are a sign the Fed is turning to drastic
measures as markets show signs of stress.
    Priya Misra, head of global rates strategy at TD Securities
in New York, called the bigger repos, coupled with the Fed's
expansion to a range of maturities for its $60 billion reserve
management purchases launched initially for short-term bills,
"significant."
     "It looks like QE (quantitative easing), it is QE," she
said.
     Even more is expected from the Fed following its surprise
50-basis-point rate cut last week.
    "Bottom line, the Fed's cutting to zero at some point in the
next two meetings," said John Herrmann, a rates strategist at
MUFG Securities in New York.
    Yields had fallen earlier on Thursday as stocks plummeted.
    "We're back to basic panic flight to quality, flight to
safety again," said Kim Rupert, senior economist at Action
Economics in San Francisco.
    Thirty-year Treasury yields were at 1.481%, up
from 1.315% at Wednesday's close.
    Two-year Treasury yields were trading at 0.497%.
    The market largely shrugged off an unexpected fall in
jobless claims last week and a drop in producer prices in
February, as well as results from the U.S. Treasury's auction of
$16 billion of 30-year bonds.
    
      March 12 Thursday 3:30PM New York / 1930 GMT
    
    
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             0.3375       0.3434    -0.091
 Six-month bills               0.3625       0.3692    -0.025
 Two-year note                 101-58/256   0.4968    0.001
 Three-year note               99-194/256   0.5816    -0.018
 Five-year note                102-72/256   0.6572    -0.007
 Seven-year note               102-18/256   0.8186    0.035
 10-year note                  105-220/256  0.8821    0.060
 30-year bond                  112-132/256  1.4808    0.166
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -3.75        -2.75    
 spread                                               
 U.S. 3-year dollar swap        -7.00        -0.25    
 spread                                               
 U.S. 5-year dollar swap        -0.50        -1.75    
 spread                                               
 U.S. 10-year dollar swap       -5.00        -4.75    
 spread                                               
 U.S. 30-year dollar swap      -61.75       -15.75    
 spread                                               
 

    

 (Additional reporting by Karen Brettell in New York; editing by
Jonathan Oatis)
  
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