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TREASURIES-Yields lower on stimulus deal doubts

Ross Kerber
·3 min read

By Ross Kerber Oct 27 (Reuters) - U.S. Treasury yields fell on Tuesday and the yield curve was flatter as hopes faded for a stimulus deal in Washington to arrive soon. The benchmark 10-year yield was down 1.5 basis points in morning trading at 0.7877%. The White House said on Tuesday a potential deal on COVID-19 relief could come in "weeks," casting doubt on whether an accord could be struck with Congress before the Nov. 3 election even as U.S. cases of the disease have swelled. The S&P 500 and the Nasdaq opened slightly higher on Tuesday following the benchmark index's worst day in a month as investors parsed through corporate earnings, while bracing for volatility in the run up to the presidential election. Higher equity prices generally move investors out of safer Treasuries. But policy factors seemed to play a bigger role in Tuesday's government bond trading, said Eric Jussaume, director of fixed income for Cambridge Trust. "The market wants some sort of stimulus. It's not getting it yet," he said. Traders also seemed to be buying up Treasuries in anticipation of more volatility tied to voting, he said. Euro zone bond yields also dipped on concerns about rising coronavirus case counts and a lack of progress on U.S. stimulus talks. New orders for key U.S.-made capital goods rose more than expected in September, wrapping up a quarter of potentially record growth in business spending and the economy, thanks to previous fiscal stimulus deals. 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 64 basis points, about 2 basis points lower than Monday's close and its lowest since Oct. 20. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was unchanged at 0.1494% in morning trading. Price Current Net Yield % Change (bps) Three-month bills 0.095 0.0966 -0.002 Six-month bills 0.11 0.1116 0.000 Two-year note 99-244/256 0.1494 0.000 Three-year note 99-208/256 0.1885 -0.002 Five-year note 99-144/256 0.3397 -0.009 Seven-year note 98-192/256 0.5593 -0.014 10-year note 98-120/256 0.7877 -0.015 20-year bond 96-64/256 1.3413 -0.019 30-year bond 95-52/256 1.5774 -0.017 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.50 0.00 spread U.S. 3-year dollar swap 8.00 0.25 spread U.S. 5-year dollar swap 6.75 0.00 spread U.S. 10-year dollar swap 2.75 0.25 spread U.S. 30-year dollar swap -34.00 0.00 spread (Reporting by Ross Kerber in Boston Editing by Nick Zieminski)