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TREASURIES-Yields fall as stocks drop for fourth straight day

Chuck Mikolajczak
·3 mins read

(Updates prices, adds Kaplan comment) By Chuck Mikolajczak Sept 21 (Reuters) - U.S. Treasury yields moved lower, but recovered from their worst levels of the day as a sell-off in equity markets continued from the prior week. Major averages on Wall Street dropped once again, with the S&P 500 on track for its fourth straight decline after touching its lowest level since July 31. Investors have become unnerved by a variety of concerns, including the possibility of new coronavirus-driven lockdowns, election uncertainty and the likelihood fresh fiscal stimulus will remain stalled. The yield on 10-year Treasury notes was down 2.8 basis points to 0.666%, after falling as low as 0.648% on the day. "You had a little bit of curve steepening towards the end of last week but right now the attention for Treasuries seems to be on the stock market," said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania. "It’s not just the weakness in stocks for today. It is the weakness we’ve seen in stocks over the past few days that is finally catching up to the bond investors." The benchmark S&P index has dropped more than 4% since the U.S. Federal Reserve's policy announcement on Sept. 16 in which the central bank pledged to keep interest rates near zero until inflation is on track to modestly exceed a 2% target for some time. On Monday, Dallas Federal Reserve President Robert Kaplan said the economy will likely need near-zero interest rates for the next two and a half or three years, but the central bank shouldn't lock itself into low borrowing costs beyond then. The index now stands down more than 9% from its Sept. 2 closing high, moving closer to what is traditionally known as a "correction," or fall of 10%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 52.9 basis points, after falling as far as 51.2, its lowest level since Sept. 4 but still well above the recent low of 33 basis points on July 24. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 0.2 basis points to 0.137%. September 21 Monday 2:35PM New York / 1835 GMT Price US T BONDS DEC0 176-21/32 0-21/32 10YR TNotes DEC0 139-156/256 0-52/256 Price Current Net Yield % Change (bps) Three-month bills 0.085 0.0862 -0.005 Six-month bills 0.105 0.1065 -0.008 Two-year note 99-250/256 0.1371 -0.002 Three-year note 99-234/256 0.1539 -0.005 Five-year note 99-236/256 0.2659 -0.013 Seven-year note 100-84/256 0.4519 -0.021 10-year note 99-156/256 0.6658 -0.028 20-year bond 98-164/256 1.202 -0.030 30-year bond 98-240/256 1.4187 -0.033 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.75 0.00 spread U.S. 3-year dollar swap 7.25 0.00 spread U.S. 5-year dollar swap 6.00 0.25 spread U.S. 10-year dollar swap 0.50 0.00 spread U.S. 30-year dollar swap -36.50 0.00 spread (Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)