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TREASURIES-Yields rise on vaccine optimism, ahead of Fed minutes

Ross Kerber
·3 min read

(Updates market activity, Biden cabinet considerations, yield curve details) By Ross Kerber Nov 23 (Reuters) - U.S. Treasury yields moved higher on Monday and the yield curve steepened as investors took encouragement from positive COVID-19 vaccine news and looked ahead to minutes from the U.S. Federal Reserve due later in the week. The benchmark 10-year yield was up 2.1 basis points at 0.8504% in early afternoon trading. 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 69 basis points, about 2 basis points higher than Friday's close. It was also closer to the high of 79 basis points reached on Nov. 10, the highest it has been since early 2018. Other parts of the yield curve traded in a similar pattern, including the spread between 5-year and 30-year notes, also up 2 basis points. Investors seemed to be moving out of ultra-safe U.S. Treasuries as stocks and commodities markets rose, said Subadra Rajappa, head of U.S. rates strategy for Societe Generale. They were also positioning ahead of minutes of the Fed's Open Markets Committee due on Wednesday, she said, and keeping an eye out for cabinet picks for financial roles by U.S. President-elect Joe Biden. "If there are any interesting or controversial picks that might create some volatility," Rajappa said. She added that seems unlikely, since Biden's nominees may have to be confirmed by a Republican-controlled Senate should they retain control of the upper house. In a note to clients on Monday, Cowen and Company analyst Jaret Seiberg said the firm sees former Fed chief Janet Yellen "as having the inside track" for the key role of U.S. Treasury secretary, after Biden suggested his pick would gain support from progressives and moderates. Progressives have been more skeptical of the other two leading candidates, Fed Governor Lael Brainard and Roger Ferguson, CEO of asset manager TIAA, he wrote. On Monday, Biden's transition team said he will nominate senior aide Anthony Blinken as U.S. secretary of state, elevating a former No. 2 at the State Department. Former Secretary of State John Kerry will be named climate czar. U.S. stock index futures rose early on Monday as hopes that the first COVID-19 vaccine could be available within weeks renewed bets on a swift economic recovery next year. U.S. healthcare workers and others recommended for the nation's first inoculations could start getting shots within a day or two of regulatory consent next month, a top official of the government's vaccine development effort said on Sunday. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was unchanged at 0.1634% in afternoon trading. November 23 Monday 12:27PM New York / 1727 GMT Price Current Net Yield % Change (bps) Three-month bills 0.07 0.071 0.003 Six-month bills 0.09 0.0913 -0.003 Two-year note 99-237/256 0.1634 0.000 Three-year note 100-26/256 0.2157 0.003 Five-year note 99-90/256 0.3828 0.007 Seven-year note 99-40/256 0.6245 0.016 10-year note 100-60/256 0.8504 0.021 20-year bond 100-104/256 1.3517 0.019 30-year bond 101-208/256 1.5492 0.018 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.75 0.00 spread U.S. 3-year dollar swap 8.00 0.00 spread U.S. 5-year dollar swap 6.75 0.25 spread U.S. 10-year dollar swap -0.50 0.00 spread U.S. 30-year dollar swap -31.75 0.25 spread (Reporting by Ross Kerber in Boston; Editing by Kirsten Donovan and Dan Grebler)