July 6, 2020 / 6:08 PM / a month ago

TREASURIES-Yields edge up as traders eye economic recovery, auctions

 (Updates with market activity, chart, previous BOSTON)
    By Noel Randewich and Ross Kerber
    July 6 (Reuters) - U.S. Treasury yields edged higher on
Monday as investors focused on an eventual economic rebound from
the coronavirus, and as traders priced in auctions this week
that will increase the supply of the low-risk debt.
    The benchmark 10-year yield was up 2.5 basis
points in afternoon trading at 0.6956%.
    Treasury auctions, including one for $29 billion of 10-year
notes set for Wednesday, will increase the supply of the
securities and put pressure on their prices.
    In addition, Wall Street and global stock markets jumped as
investors focused on the prospects of a swift recovery from the
COVID-19 pandemic. Last Thursday, ahead of the U.S. holiday
weekend, the Labor Department reported that nonfarm payrolls
increased in June by the most since the government started
keeping records in 1939. 
    "You’ve got the auctions coming up, so there is probably
some positioning ahead of those, and you have seen a substantial
rally in equity markets," said Eric Jussaume, director of fixed
income for Cambridge Trust. "People are getting caught up to the
better than expected economic numbers we had last week." 
    Investors also bet on China leading the revival from a
pandemic-driven downturn, looking past a surge in new cases of
COVID-19 at home.
    During the U.S. Independence Day weekend, several states
reported a record increase in new infections, with Florida
surpassing the highest daily tally reported by any European
country during the peak of the outbreak.

    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 54 basis points. That was about two basis
points higher than Friday's close and roughly in line with its
level since June 15.
    
    
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up less than
a basis point at 0.1606% in afternoon trading.
    
        July 6 Monday 1:41 pm New York / 1741 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1425       0.1445    0.002
 Six-month bills               0.165        0.1679    0.006
 Two-year note                 99-238/256   0.1606    0.006
 Three-year note               100-44/256   0.1913    0.010
 Five-year note                99-176/256   0.3133    0.016
 Seven-year note               99-220/256   0.5205    0.021
 10-year note                  99-84/256    0.6956    0.025
 20-year bond                  98-64/256    1.2245    0.030
 30-year bond                  94-228/256   1.4618    0.029
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.50        -0.50    
 spread                                               
 U.S. 3-year dollar swap         4.50        -0.25    
 spread                                               
 U.S. 5-year dollar swap         2.75        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -3.00        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -49.75         0.00    
 spread                                               
                                                      
 

    
 (Reporting by Noel Randewich in Oakland, Calif., and by Ross
Kerber in Boston; Editing by Andrea Ricci and Chizu Nomiyama)
  
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