TREASURIES-Yields tumble amid mixed signals on stimulus

BY Reuters | TREASURY | 10/13/20 03:25 PM EDT
    (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
    Souza also noted that the risk aversion that sent Wall
Street lower followed Johnson & Johnson's (JNJ) 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
    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
    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        Current   Net
                                            Yield %   Change
 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

                               Last (bps)   Net
 U.S. 2-year dollar swap         8.75         0.25
 U.S. 3-year dollar swap         8.00         0.25
 U.S. 5-year dollar swap         7.50         0.00
 U.S. 10-year dollar swap        3.25         0.25
 U.S. 30-year dollar swap      -33.50         1.25

 (Reporting by Karen Pierog; Editing by Andrea Ricci; Editing by
David Gregorio)

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.