February 3, 2020 / 7:44 PM / 13 days ago

TREASURIES-Yields retreat from gains as traders watch coronavirus response

 (Recasts with change in market activity; adds analyst comment)
    By Ross Kerber
    Feb 3 (Reuters) - U.S. Treasury yields pared gains on Monday
as traders took stock of the international response to the
coronavirus epidemic.
    The benchmark 10-year yield was up less than 1
basis point at 1.5238% in afternoon trading, down from 1.575%
earlier.
    Uncertainty over the economic fallout from coronavirus,
which has already interrupted supply lines and resulted in
massive transport cancellations, rattled investors.
    "Everyone is focused on the coronavirus and there aren't a
lot of ways to measure its economic impact yet," said John
Roberts, U.S. rates strategist at NatWest Markets.
    Yields rose earlier, fueled partly by a report showing an
unexpected rebound in U.S. factory activity in
January. 
    Markets in China plunged on Monday, the first trading day
after an extended New Year break, and China accused the U.S. of
whipping up panic.
    In late December, 10-year yields were approaching 2%. The
sharp fall since then has investors taking a breath, waiting to
see the long-term impact of the virus while tracking other
issues like Boeing Co's aircraft production halt, said
John Herrmann, director of U.S. rates strategy for MUFG
Securities.
    "At this point we have priced-in a lot of bad news," he
said.
    Fears surrounding the spread of the coronavirus, which the
World Health Organization has declared a global emergency, last
week led the S&P 500 and the Dow Jones Industrials
to record their worst weekly losses in at least five months.
    The death toll in China from the newly identified virus,
which emerged in Wuhan, capital of the province of Hubei, rose
to 361 as of Sunday, up 57 from the previous day, the National
Health Commission said.
    The two-year  U.S. Treasury yield, which
typically moves in step with interest rate expectations, was up
2.6 basis points to 1.355% in afternoon trading. 
    
      February 3 Monday 2:12PM New York / 1912 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.53         1.5612    0.007
 Six-month bills               1.51         1.5466    0.005
 Two-year note                 100-10/256   1.355     0.026
 Three-year note               100-124/256  1.3316    0.025
 Five-year note                100-32/256   1.349     0.024
 Seven-year note               100-88/256   1.4481    0.014
 10-year note                  102-12/256   1.5238    0.005
 30-year bond                  108-112/256  1.9976    -0.014
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.75        -0.50    
 spread                                               
 U.S. 3-year dollar swap         2.50         0.00    
 spread                                               
 U.S. 5-year dollar swap         0.00        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -5.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -33.00         0.50    
 spread                                               
 
    

 (Reporting by Ross Kerber
Editing by Leslie Adler
)
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