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TREASURIES-Yields reach four-month highs on stimulus hopes

Karen Brettell
·3 min read

(Adds quote, details on stimulus talks, updates yields) By Karen Brettell NEW YORK, Oct 20 (Reuters) - Benchmark U.S. Treasury yields hit four-month highs on Tuesday and the yield curve steepened as hopes grew that U.S. lawmakers will agree on a deal for new stimulus. President Donald Trump on Tuesday pushed for a comprehensive COVID-19 relief package, and said he would accept a deal worth more than $2.2 trillion despite opposition to large spending measures among his fellow Republicans in the U.S. Senate. House of Representatives Speaker Nancy Pelosi said she was optimistic Democrats could reach a bipartisan deal as talks with Treasury Secretary Steven Mnuchin approached a Tuesday deadline for reaching a deal that could pass Congress before Election Day on Nov. 3. "Once again the market (is) pricing in some hope of a last minute fiscal package, and it seems like what we’ve heard from the speaker of the house has been encouraging enough to help risk assets and cause a little bit of a steepening of the U.S. yield curve," said Michael Lorizio, senior fixed income trader at Manulife Asset Management in Boston. Benchmark 10-year note yields rose four basis points on the day to a high of 0.801%, the highest since June 10. The yields have traded in a tight range from 0.50% to 0.80% since April, with the exception of a brief spike to 0.96% in early June. The yield curve between two-year and 10-year notes steepened to 65 basis points, the steepest since June 8. Some investors are betting long-dated yields will rise after the Nov. 3 presidential election on the likelihood of greater fiscal spending to boost the economy, with Democrats expected to support a larger package if they win a majority in the Senate. New government spending should improve the economic outlook but would also increase Treasury supply. Ongoing weakness from Covid-related business disruptions, however, is likely to keep downward pressure on yields with the Federal Reserve also likely to act to keep rates near historical lows unless the economy shows improvement. The Treasury Department will sell $22 billion in 20-year bonds on Wednesday and $17 billion in five-year Treasury Inflation-Protected Securities (TIPS) on Thursday. October 20 Tuesday 3:06PM New York / 1906 GMT Price US T BONDS DEC0 173-15/32 -1-1/32 10YR TNotes DEC0 138-176/256 -0-60/25 6 Price Current Net Yield % Change (bps) Three-month bills 0.1 0.1014 0.000 Six-month bills 0.115 0.1167 0.000 Two-year note 99-245/256 0.1472 0.000 Three-year note 99-204/256 0.1933 0.005 Five-year note 99-140/256 0.3425 0.012 Seven-year note 98-180/256 0.5658 0.026 10-year note 98-96/256 0.7974 0.035 20-year bond 95-220/256 1.3641 0.050 30-year bond 94-156/256 1.6031 0.055 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 7.75 0.00 spread U.S. 10-year dollar swap 2.75 -0.25 spread U.S. 30-year dollar swap -35.25 -0.25 spread (Editing by Nick Zieminski and Tom Brown)