January 21, 2020 / 3:28 PM / a month ago

TREASURIES-U.S. yields fall on worries about China's new virus

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 21 (Reuters) - U.S. Treasury prices surged on
Tuesday, pushing yields lower as risk appetite dropped, amid
worries about the potential fallout from a lethal virus that has
broken out in China.
    U.S. two-year note yields fell to two-week lows, while 
those on 10-year and 30-year yields slid after rising in the
previous two sessions.
    Wall Street shares struggled, as well, as investors tried to
make sense of this new virus outbreak.
    Global officials confirmed that the coronavirus strain is
contagious between humans. The death toll from a mysterious
flu-like virus in China climbed to six on Tuesday as new cases
surged beyond 300.
    "The fear is that it could be a SARS-type event, which was
an economic issue," said Ellis Phifer, market strategist at
Raymond James in Tennessee. "But this is all cautionary. The
market is not panicking or anything."
    China's Severe Acute Respiratory Syndrome (SARS) outbreak
from 2002 to 2003 killed nearly 800 people at the time.
    In morning trading, U.S. 10-year yields fell to
1.776%, from 1.835% late on Friday.
    U.S. financial markets were closed on Monday for the Martin
Luther King, Jr holiday.
    Yields on U.S. 30-year bonds were at 2.235%,
down from 2.296% on Friday.
    On the short end of the curve, U.S. two-year yields fell to
two-week lows of 1.535% from Friday's 1.569%. They
were last at 1.532%.
    The yield curve flattened on Tuesday after steepening last
week, as global rates fell on caution about the coronavirus. The
spread between the two-year and 10-year note yields narrowed  to
24.47 basis points. 
    Meanwhile, U.S. President Donald Trump's impeachment trial
in the Senate, which begins on Tuesday, has also caused some
mild jitters.
    Democrats have called on the Senate to remove the Republican
president from office, describing him as a danger to American
democracy and national security. Trump and his lawyers have
decried his impeachment, saying he has done nothing wrong and
that Democrats are simply trying to stop him from being
re-elected.
    "The impeachment trial is finally here," said Raymond James'
Phifer. "I don't think the concern is anything more than that.
Now that it's here, let's be a little cautious again."
    
   January 21 Tuesday 10:15AM New York/1515 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5325       1.5637    0.003
 Six-month bills               1.525        1.5621    -0.003
 Two-year note                 100-44/256   1.5345    -0.035
 Three-year note               99-226/256   1.5403    -0.041
 Five-year note                100-202/256  1.5832    -0.048
 Seven-year note               100-96/256   1.6924    -0.053
 10-year note                  99-188/256   1.7795    -0.056
 30-year bond                  102-240/256  2.2393    -0.057
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.75         0.00    
 spread                                               
 U.S. 3-year dollar swap         4.50         0.25    
 spread                                               
 U.S. 5-year dollar swap         1.75         0.50    
 spread                                               
 U.S. 10-year dollar swap       -4.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -31.00         0.75    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)
  
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