February 4, 2020 / 2:44 PM / 14 days ago

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

    By Ross Kerber
    BOSTON, Feb 4 (Reuters) - U.S. Treasury yields rose on
Tuesday as investors were encouraged by steps taken by China in
response to the coronavirus.
    The benchmark 10-year yield was up 6.5 basis
points in morning trading at 1.5854%.
    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 and helped the benchmark yield
bounce back from near 1.5% at the end of last week.
    "Some of the steps they're taking are allowing the market to
take a breather," said Justin Hoogendoorn, head of fixed income
strategy at Piper Jaffray & Co.
    Hoogendoorn 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
    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.
     Investors were also 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 10-year note reached as high as 1.599% earlier on
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 4.8 basis
points at 1.401% in morning trading.
      February 4 Tuesday 9:32AM New York / 1432 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.545        1.577     -0.002
 Six-month bills               1.525        1.5625    0.005
 Two-year note                 99-243/256   1.401     0.048
 Three-year note               100-82/256   1.3884    0.059
 Five-year note                99-216/256   1.4075    0.064
 Seven-year note               99-240/256   1.5094    0.068
 10-year note                  101-124/256  1.5854    0.065
 30-year bond                  106-252/256  2.0599    0.063
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         6.00         0.25    
 U.S. 3-year dollar swap         2.50         0.25    
 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)
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