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

BY Reuters | ECONOMIC | 09/17/20 02:55 PM EDT
    (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)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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