April 27, 2020 / 7:44 PM / a month ago

CORRECTED-TREASURIES-Yields higher despite strong note auctions

 (Corrects headline and first paragraph to make clear yields
rose despite strong auctions)
    By Karen Pierog
    CHICAGO, April 27 - U.S. Treasury yields rose on Monday
despite strong auctions of two- and five-year notes as investors
braced for massive looming supply to finance the stimulus
measures aimed at combating the economic fallout of the
coronavirus outbreak.
     While the bonds rallied briefly after the auctions, the
benchmark 10-year yield was still up 5.8 basis
points at 0.6542%.
    The five-year note yield, last up 3.7 basis
points at 0.4005%, had dipped after the U.S. Treasury sold $43
billion of five-year notes with nearly half of bids awarded at a
high yield of 0.394%.    
    Investors were looking to Treasuries for yield and as a
haven due to uncertainty about how badly the economy will dive
and how soon it might recover, said Kim Rupert, managing
director, global fixed income analysis, at Action Economics in
San Francisco.
    "Uncertainty is keeping a solid bid in Treasuries," she
said, even in the face of "gargantuan" supply.    
    An auction of $42 billion of two-year notes was also
described as strong by analysts. The two-year
 U.S. Treasury yield, which typically moves in step
with interest rate expectations, retreated from earlier session
highs and was last up less than a basis point at 0.2243%.
    On Tuesday, $35 billion of seven-year notes are slated to be
sold. 
    After the Bank of Japan announced more stimulus measures on
Monday, the focus this week will turn to the Federal Reserve's
two-day policy meeting, which will conclude on Wednesday with
the Fed's rate decision.
    Jim Vogel, senior rates strategist at FHN Financial in
Memphis, said the macro picture from the Fed may be "a bit
bleaker" than the markets have been regarding reopenings and
recoveries in the face of the virus.
    "If (Fed Chairman Jerome) Powell chooses to emphasize
messages about a slow rebound in 2021, that could be a news item
from Wednesday and that will reverberate a little bit based on
where Q1 GDP comes in," he said.
    More states are poised this week to begin loosening
restrictions on businesses even as ways to systematically screen
for the coronavirus were lacking. The number of known U.S.
infections topped 960,000 on Sunday with deaths surpassing
54,700.
    In repurchase agreement (repo) operations on Monday, the New
York Federal Reserve said it accepted all $200 million in bids
for a 29-day operation. No bids were submitted for an overnight
repo operation meant to keep the federal funds rate within the
target range. In a one-day repo operation later in the day, all
$300 million in bids were accepted.

April 27 Monday 1:45PM New York / 1845 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1125       0.1144    -0.008
 Six-month bills               0.14         0.142     0.000
 Two-year note                 100-74/256   0.2243    0.008
 Three-year note               99-228/256   0.2871    0.026
 Five-year note                100-124/256  0.4005    0.037
 Seven-year note               100-112/256  0.5605    0.051
 10-year note                  108-4/256    0.6542    0.058
 30-year bond                  118-168/256  1.2483    0.069
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        15.00        -1.25    
 spread                                               
 U.S. 3-year dollar swap         8.75        -1.75    
 spread                                               
 U.S. 5-year dollar swap         6.00        -1.25    
 spread                                               
 U.S. 10-year dollar swap        1.50        -1.25    
 spread                                               
 U.S. 30-year dollar swap      -43.50        -0.75    
 spread                                               
 


 (Reporting by Karen Pierog in Chicago; Editing by Leslie Adler)
  
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