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Bonds News

TREASURIES-Yields fall in 'grinding rally' ahead of 20-year bond auction

 (Recasts, updates yields, adds comments from analyst and
Pelosi)
    By Karen Pierog
    CHICAGO, Aug 18 (Reuters) - U.S. Treasury yields drifted
lower on Tuesday as the market looked ahead to an auction of
20-year bonds and the release of Federal Reserve meeting
minutes.
    The benchmark 10-year yield was last down 1.3
basis points at 0.6704%.
    Gennadiy Goldberg, an interest rate strategist at TD
Securities in New York, said the market was in a "grinding
rally" as it awaited Wednesday's $25 billion bond auction and
the minutes from the Fed's July meeting. 
    "The market is hoping for a good 20-year auction tomorrow,
probably thinking the Fed remains dovish in the minutes as
well," Goldberg said.
    Collin Martin, fixed income strategist at the Schwab Center
for Financial Research in New York, said Treasuries were range
bound due to "summer doldrums" and a political stalemate over a
new round of federal aid to bolster the coronavirus-hit economy.
    U.S. House of Representatives Speaker Nancy Pelosi said on
Tuesday that Democrats in Congress are willing to cut their 
relief bill in half to get an agreement on new legislation with
the White House and Republicans. 
    After selling Treasuries for three straight months,
foreigners became buyers of the government's notes and bonds in
June, according to Treasury Department data on Monday.

    "There could be a pick up in foreign demand as people are
still looking for high-quality, liquid investments in a world
where yields are still very, very low," Martin said.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, which is viewed as an indicator of
economic expectations, was last at 52.40 basis points, about a
basis point lower than at Monday's close.
    August 18 Tuesday 1:57PM New York / 1857 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.105        0.1065    -0.002
 Six-month bills               0.12         0.1217    0.000
 Two-year note                 99-246/256   0.1451    -0.006
 Three-year note               99-220/256   0.1722    -0.011
 Five-year note                99-220/256   0.2786    -0.006
 Seven-year note               99-80/256    0.4757    -0.007
 10-year note                  99-144/256   0.6704    -0.013
 20-year bond                  99-132/256   1.1525    -0.025
 30-year bond                  99-92/256    1.4012    -0.023
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.50         0.00    
 spread                                               
 U.S. 3-year dollar swap         6.00         0.25    
 spread                                               
 U.S. 5-year dollar swap         4.50        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -1.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -41.25         0.25    
 spread (Reporting by Karen Pierog; Editing by Will Dunham)
  
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