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TREASURIES-Yields rise back from declines, yield curve still flatter

Ross Kerber
·3 mins read

(Updates with market activity, analyst comment, auction result) By Ross Kerber Sept 17 (Reuters) - U.S. Treasury yields came back from declines on Thursday as stocks pared losses, but the yield curve remained flatter as investors stayed skeptical of Federal Reserve efforts to stimulate economic growth and took stock of a report showing persistently high jobless claims. The yield on the benchmark 10-year U.S. Treasury note was down half a basis point at 0.6822% in afternoon trading after touching as low as 0.646%, the lowest since Sept. 4, on Thursday morning. The trading marked a more risk-off environment than on Wednesday afternoon, when investors seemed to accept actions described by Fed Chair Jerome Powell at an online news conference could bring about more inflation. Wall Street's main indexes were down on Thursday on weakness in technology stocks, but back from their lowest levels earlier in the day. The stock comeback likely offset other negative factors that had served to lower yields at the start of the session, said Tom di Galoma, managing director of Seaport Global Holdings. "With some of the sell-off in equities we saw, probably there was some money leaving Treasuries to go into equities," he said. A steady supply of corporate debt has also served to prop up Treasury yields by giving fund managers more attractive assets to buy, he said. An early afternoon auction of 10-year inflation-protected Treasuries received "solid" demand with dealers accounting for 16.3% of accepted bids compared with 19% on average, according to a note from BMO Capital Markets rates strategist Ben Jeffery. A morning report from the Labor Department showed the number of Americans filing new claims for unemployment benefits fell last week, but remained at an extremely high level as the jobs recovery shifts into low gear and consumer spending cools amid fading fiscal stimulus. 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 55 basis points, a basis point lower than Wednesday's close but still above its level of 33 basis points reached on July 24. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down a less than a basis point at 0.133% in afternoon trading. September 17 Thursday 2:37PM New York / 1837 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0925 0.0938 -0.018 Six-month bills 0.11 0.1116 -0.005 Two-year note 99-252/256 0.133 -0.006 Three-year note 99-232/256 0.1564 -0.006 Five-year note 99-230/256 0.2707 -0.003 Seven-year note 100-64/256 0.4634 -0.002 10-year note 99-116/256 0.6822 -0.005 20-year bond 98-108/256 1.2145 -0.013 30-year bond 98-160/256 1.4317 -0.015 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 6.75 0.00 spread U.S. 5-year dollar swap 5.75 0.50 spread U.S. 10-year dollar swap 0.25 0.25 spread U.S. 30-year dollar swap -36.50 1.25 spread (Reporting by Ross Kerber in Boston; editing by Jonathan Oatis)