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TREASURIES-Yields tumble amid mixed signals on stimulus

Karen Pierog
·3 mins read

(Recasts, updates yields, adds analyst comments) By Karen Pierog CHICAGO, Oct 13 (Reuters) - U.S. Treasury yields moved lower on Tuesday as disparate views in Washington over the next move on coronavirus aid contributed to a risk-off tone in markets. The benchmark 10-year yield was last down 4.4 basis points at 0.7305%. "On stimulus, there's still a divide," said Eric Souza, senior portfolio manager at SVB Asset Management in San Francisco, adding that the discord eased concerns over growing supply of Treasury debt. A new funding package to combat the economic fallout from the pandemic remained up in the air on Tuesday as U.S. Senate Majority Leader Mitch McConnell said his chamber would vote on $500 billion of targeted funding next week, while President Donald Trump tweeted "Go big or go home!!!" Earlier on Tuesday, U.S. House Speaker Nancy Pelosi said the White House's latest $1.8 trillion offer falls "significantly short" of what is needed. Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research in New York, said while nothing is expected ahead of the Nov. 3 election, a deal is likely afterwards regardless of the election outcome and that could lift yields. "I think the path of least resistance is probably higher (yields) in Treasuries but it's a slow move because we still don't have signs of inflation or excessively strong growth," she said. Souza also noted that the risk aversion that sent Wall Street lower followed Johnson & Johnson's announcement it was pausing clinical trials of a COVID-19 vaccine candidate due to an unexplained illness in a study participant. Risk appetite has seesawed as investors weigh a rise in the number of U.S. coronavirus cases, deaths, hospitalizations, and rates of positive test results against promising vaccine developments. On the economic data front, the U.S. Labor Department reported consumer prices rose for a fourth straight month in September, but at a slower pace amid considerable slack in the economy.. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes was last at 58.50 basis points, 3.30 basis points lower than at Friday's close. The figure is viewed as an indicator of economic expectations, October 13 Tuesday 3:14PM New York / 2014 GMT Price Price Current Net Yield % Change (bps) Three-month bills 0.095 0.0963 -0.005 Six-month bills 0.115 0.1167 0.000 Two-year note 99-248/256 0.1409 -0.012 Three-year note 99-214/256 0.1799 -0.018 Five-year note 99-186/256 0.3056 -0.030 Seven-year note 99-24/256 0.5076 -0.041 10-year note 99 0.7305 -0.044 20-year bond 97-52/256 1.2852 -0.051 30-year bond 96-156/256 1.5167 -0.057 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.75 0.25 spread U.S. 3-year dollar swap 8.00 0.25 spread U.S. 5-year dollar swap 7.50 0.00 spread U.S. 10-year dollar swap 3.25 0.25 spread U.S. 30-year dollar swap -33.50 1.25 spread (Reporting by Karen Pierog; Editing by Andrea Ricci; Editing by David Gregorio)