March 18, 2020 / 3:34 PM / 15 days ago

TREASURIES-Yields higher as investors weigh U.S. pandemic response

 (Updates with market action)
    By Ross Kerber
    BOSTON, March 18 (Reuters) - U.S. Treasury yields swung
higher on Wednesday as investors watched for the U.S. response
to the coronavirus pandemic to take shape.
    The benchmark 10-year yield was up 9.4 basis
points at 1.0897% in morning trading, after reaching above 1.22%
and then sinking below 1% during the session.
    Stan Shipley, macro research analyst for Evercore ISI, said
many traders do not know what to do as they sort out various
moves by central banks and the Trump administration responding
to the health emergency and shoring up the economy.
    "Yields are very volatile right now. There's a lot of
technical issues going on, he said.
    With the Federal Reserve having already lowered its target
interest rates close to zero, the next step should be a massive
U.S. spending plan, he said. "We need a big fiscal package, over
$1.5 trillion, it could be $2 trillion."
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up less than
a basis point at 0.4696% in morning trading.
    The U.S. yield curve, measured as the difference between the
yields on two- and 10-year Treasury notes, was at 61.42 basis
points, up 4.90 from Tuesday's close and at its highest levels
since early 2018.
    Cases of the respiratory illness have been reported in all
50 U.S. states and millions of Americans are staying home from
work. 
    In response the Trump administration on Tuesday pressed for
a $1 trillion stimulus package, possibly to include $1,000
direct payments to individual Americans.
    For its part, the Fed on Tuesday said it would reopen the
so-called Commercial Paper Funding Facility to underwrite the
short-term loans that companies often use to pay for their
operations, a key financial market backstop first set up 2007 to
2009.
    It also extended its reach as the economy's lender of last
resort to the two dozen Wall Street primary dealers, by letting
them pledge municipal bonds, corporate debt and equity
securities as collateral for 90-day Fed loans in order to keep
credit flowing.
    In addition, the New York Fed said it will make up to $1
trillion a day available for loans in the repurchase agreement
(repo) market for the remainder of this week.
    On Wednesday morning, the New York Fed said it accepted
$85.8 billion in overnight repo bids from primary dealers.

    March 18 Wednesday 11:15AM New York / 1515 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.02         0.0203    -0.188
 Six-month bills               0.155        0.1573    -0.082
 Two-year note                 101-69/256   0.4696    0.009
 Three-year note               99-208/256   0.5633    0.021
 Five-year note                102-30/256   0.6891    0.039
 Seven-year note               101-12/256   0.9688    0.075
 10-year note                  103-216/256  1.0897    0.094
 30-year bond                  106-152/256  1.7172    0.137
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.50         0.75    
 spread                                               
 U.S. 3-year dollar swap         2.25        -0.75    
 spread                                               
 U.S. 5-year dollar swap         3.25        -3.25    
 spread                                               
 U.S. 10-year dollar swap      -12.25        -6.00    
 spread                                               
 U.S. 30-year dollar swap      -72.00        -7.75    
 spread                                               
 
 (Reporting by Ross Kerber
Editing by Nick Zieminski)
  
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