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TREASURIES-U.S. yields rise after stimulus bill signed

Gertrude Chavez-Dreyfuss
·3 min read

By Gertrude Chavez-Dreyfuss NEW YORK, Dec 28 (Reuters) - U.S. Treasury yields rose on Monday in a holiday-thinned session, as risk appetite increased after President Donald Trump signed into law overnight an additional coronavirus relief package. Financial markets were closed on Friday for Christmas day. The yield curve was also steeper on Monday, in line with the upbeat mood overall, with the bill signing news adding to positive developments around the world in the last few days that included COVID-19 vaccine rollouts and a Brexit trade deal. On Sunday, Trump signed a $2.3 trillion pandemic aid and spending package, retreating from his threat to block the bill. Democrats in the U.S. Congress on Monday will try to push through expanded $2,000 pandemic relief payments for Americans, which Trump had pushed for after the legislation was approved. "The market is trading with a positive risk-on tone to it ... breathing a sigh of relief that President Trump backed away from his threat of vetoing the stimulus bill and finally signed it," said Gennadiy Goldberg, senior rates strategist, at TD Securities in New York. In morning trading, U.S. benchmark 10-year yields rose to 0.954% from 0.93% late on Thursday. U.S. 30-year yields climbed to 1.702% from Thursday's 1.666%. On the front end of the curve, U.S. two-year yields inched up to 0.129% from 0.121% on Thursday. The yield curve steepened, with the spread between the two-year and 10-year notes at 81.9 basis points. Last week, that curve hit its widest in more than three years. Breakeven rates on 10-year TIPS, which measure expected annual inflation for the next 10 years, also climbed and were last at 1.98%, the highest since roughly April 2019. The U.S. Treasury, meanwhile, auctions a record $176 billion in shorter maturities this week, starting with Monday's $58 billion in two-year notes and $59 billion in five-year debt. Justin Lederer, rates strategist at Cantor Fitzgerald in New York, said he expects solid demand for U.S. two-year notes, given that the front end "remains well anchored with Fed expectations, decreasing bill issuance, and increasing bank reserves." He also sees decent demand for the U.S. five-year note auction, but would not be surprised if the yield comes below the expected level at the bid deadline. December 28 Monday 9:57AM New York / 1457 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0925 0.0938 0.005 Six-month bills 0.1025 0.104 0.005 Two-year note 99-254/256 0.1291 0.008 Three-year note 99-214/256 0.1806 0.011 Five-year note 99-250/256 0.3798 0.015 Seven-year note 99-184/256 0.6666 0.019 10-year note 99-64/256 0.9547 0.025 20-year bond 97-252/256 1.4925 0.033 30-year bond 98-48/256 1.7026 0.037 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.00 0.00 spread U.S. 3-year dollar swap 7.50 0.00 spread U.S. 5-year dollar swap 7.75 -0.25 spread U.S. 10-year dollar swap 0.75 0.00 spread U.S. 30-year dollar swap -26.00 0.00 spread (Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan Oatis)