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TREASURIES-Yields fall as coronavirus fears dent risk appetite

Karen Brettell and Noel Randewich

(Adds detail on TIPS auction, investor comment, updates prices and removes NEW YORK from dateline) By Karen Brettell and Noel Randewich June 18 (Reuters) - U.S. Treasury yields fell on Thursday after cases of the novel coronavirus rose in several U.S. states, deepening concerns that the economy may not bounce back as quickly as hoped. Several U.S. states reported a surge in new COVID-19 infections on Wednesday and the daily count of infections also hit a new benchmark in California and Texas. Around 400 workers also tested positive for the virus at an abattoir in northern Germany, while a Chinese medical expert said Beijing had brought its recent outbreak under control. “The focus right now is what’s going on with the virus,” said Zach Griffiths, an interest rate strategist at Wells Fargo in Charlotte, North Carolina. “Markets are trying to balance some more positive economic data with virus outbreaks.” Benchmark 10-year Treasury yields edged lower in afternoon trading, last down nearly four basis points at 0.694%. They rose as high as 0.959% on June 5 after data showed that employers unexpectedly added jobs in May, but have fallen since as optimism over the speed of the economic recovery has ebbed. The yield curve between two-year and 10-year notes flattened four basis points to 50 basis points. Data on Thursday showed that initial claims for state unemployment benefits totaled a seasonally adjusted 1.508 million for the week ended June 13, down from 1.566 million in the prior week, and the 11th straight weekly drop after reaching a record 6.867 million in late March. Factory activity in the U.S. mid-Atlantic region rebounded sharply in June, offering hope that the manufacturing sector was regaining its footing. The Treasury sold $15 billion in five-year Treasury Inflation-Protected Securities (TIPS) at a high yield of -0.766%. "The auction went relatively well," said Gennadiy Goldberg, an interest rate strategist at TD Securities. "It shows how even with negative real interest rates, there is still demand for an inflation-adjusted product." Real interest rates reflect bond yields after adjusting for expected inflation. The Treasury will also sell $134 billion in two-year, five-year and seven-year notes next week. June 18 Thursday 3:13PM New York / 1913 GMT Price US T BONDS SEP0 177-14/32 1-8/32 10YR TNotes SEP0 138-212/256 0-60/256 Price Current Net Yield % Change (bps) Three-month bills 0.155 0.1572 -0.021 Six-month bills 0.1725 0.175 -0.005 Two-year note 99-221/256 0.1953 -0.002 Three-year note 100-22/256 0.2212 -0.005 Five-year note 99-160/256 0.3265 -0.012 Seven-year note 99-216/256 0.5229 -0.027 10-year note 99-88/256 0.6937 -0.039 20-year bond 98-56/256 1.2261 -0.061 30-year bond 94-224/256 1.4622 -0.061 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 6.00 -0.50 spread U.S. 3-year dollar swap 4.25 0.00 spread U.S. 5-year dollar swap 3.25 -0.25 spread U.S. 10-year dollar swap -2.75 0.25 spread U.S. 30-year dollar swap -50.50 0.50 spread (Reporting by Karen Brettell and Noel Randewich; editing by Jonathan Oatis)