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TREASURIES-Yield higher after soft 10-year auction

Karen Brettell

(Adds 10-year auction results, quote, updates prices) By Karen Brettell NEW YORK, Sept 9 (Reuters) - U.S. Treasury yields rose on Wednesday after the government sold $35 billion in 10-year notes to slightly soft demand, and ahead of a 30-year bond auction on Thursday. The 10-year notes sold at a high yield of 0.704%, around one basis point higher than where the debt traded before the auction. “The auction was a little weaker than expected,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. “I’m not completely surprised by the tail just given some of the short base, there was a lot of short covering that went on and that took away some of the bid.” Treasury yields have been choppy as investors weigh equity volatility, which has boosted demand for the safe-haven debt, against heavy debt supply. But benchmark 10-year notes have for the most part held in a tight range since the beginning of April as the Federal Reserve keeps interest rates zero bound and continues its bond purchases. The yield rose 2 basis points to 0.703% on Wednesday. The Treasury has been increasing the size of its auctions across the curve as it pays for stimulus meant to boost the economy after coronavirus lockdowns. The next focus will be the Treasury’s sale of $23 billion in 30-year bonds on Thursday, after the government saw weak demand for a record-large sale of the bonds at its August refunding. The sale is up from $19 billion at July's reopening but below the $26 billion sold last month. The Treasury on Thursday will also announce the size of its 20-year bond auction scheduled for next week. Another major focus is whether the U.S. Congress is likely to pass new stimulus to boost the economy after the spread of the novel coronavirus closed businesses across the country. If new spending is not imminent it could boost demand for Treasuries, as the threat of further increases in supply in the near term would ease. At the same time, concerns about further economic weakness would grow. “That is 1-1.5 trillion dollars of supply that won’t hit the market, and that’s quite a bit of fiscal drag as well,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. U.S. Senate Republican and Democratic leaders on Wednesday held to their radically different positions on what is needed to address the continuing fallout from the coronavirus pandemic, one day before a vote on a modest Republican bill that appeared destined for defeat. September 9 Wednesday 3:00PM New York / 1900 GMT Price US T BONDS DEC0 175-22/32 -0-19/32 10YR TNotes DEC0 139-68/256 -0-32/25 6 Price Current Net Yield % Change (bps) Three-month bills 0.11 0.1116 -0.007 Six-month bills 0.125 0.1268 -0.002 Two-year note 99-246/256 0.1449 0.004 Three-year note 99-220/256 0.172 0.001 Five-year note 99-220/256 0.2785 0.006 Seven-year note 100-32/256 0.4817 0.013 10-year note 99-64/256 0.7033 0.019 20-year bond 97-208/256 1.2493 0.035 30-year bond 97-244/256 1.4596 0.037 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.25 0.00 spread U.S. 3-year dollar swap 6.75 -0.25 spread U.S. 5-year dollar swap 6.00 0.00 spread U.S. 10-year dollar swap 0.25 0.25 spread U.S. 30-year dollar swap -38.00 0.25 spread (Reporting by Karen Brettell; Editing by Nick Zieminski and Leslie Adler)