Markets News

TREASURIES-Yields rise as traders encouraged by China response to coronavirus

 (New throughout, updates prices, yields, market activity and
analyst comments)
    By Ross Kerber
    BOSTON, Feb 4 (Reuters) - U.S. Treasury yields rose on
Tuesday as investors grew more comfortable with risk, encouraged
by steps taken by China in response to the coronavirus.
    The benchmark 10-year yield was up 8.4 basis
points in afternoon trading at 1.6043%.
    Fresh intervention by China's central bank calmed some
nerves and helped Chinese stocks reverse some losses. Although
the spread of coronavirus showed no signs of slowing, investors
regarded the actions positively. 
    The benchmark yield bounced up from near 1.5% last week and
on Monday, a level that Jacob Oubina, senior economist for RBC
Capital Markets, called too low given many positive U.S.
economic indicators and healthy company earnings.
    "We were testing 150 (basis points) on tens, which was
completely mis-aligned with economic fundamentals," he said.
    Justin Hoogendoorn, head of fixed income strategy at Piper
Jaffray & Co, said he still expects more negative public health
news to emerge from China and other countries dealing with the
spread of the virus.
    But for now, he said, the bond market is in the midst of "a
snapback from moving too far too fast."
    In a bid to cushion the epidemic's economic blow, China
injected 1.7 trillion yuan ($242.74 billion) via reverse repos
on Monday and Tuesday, helping Chinese stocks reverse some
losses and lifting the world equity index.

    The monetary intervention boosted investor sentiment even as
several economists cut their forecasts for 2020 global growth,
with the spread of coronavirus showing no signs of slowing. The
death toll from the outbreak has surpassed 420, with businesses
suspending their operations in China.
    Equity markets surged on Tuesday in response to China's
    Separately investors were waiting for the full results of
the Iowa caucuses, the first state contest for the U.S.
Democratic presidential nomination, which got off to a chaotic
start on Monday as results were delayed.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 6.2 basis
points at 1.415% in afternoon trading.
      February 4 Tuesday 1:41PM New York / 1841 GMT Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.545        1.577     -0.002
 Six-month bills               1.5275       1.565     0.008
 Two-year note                 99-236/256   1.415     0.062
 Three-year note               100-70/256   1.4047    0.076
 Five-year note                99-194/256   1.4255    0.082
 Seven-year note               99-208/256   1.5284    0.087
 10-year note                  101-80/256   1.6043    0.084
 30-year bond                  106-136/256  2.0796    0.083
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         6.50         0.75    
 U.S. 3-year dollar swap         2.75         0.50    
 U.S. 5-year dollar swap         0.25         0.25    
 U.S. 10-year dollar swap       -4.75         0.25    
 U.S. 30-year dollar swap      -32.75         0.00    
 (Reporting by Ross Kerber; editing by Jonathan Oatis and David