TREASURIES-Longer-term yields dip with focus on stimulus

BY Reuters | TREASURY | 10/14/20 10:12 AM EDT
       By Karen Pierog
    CHICAGO, Oct 14 (Reuters) - Yields on longer-term U.S.
Treasuries drifted a touch lower on Wednesday as the market
awaited developments from Washington on measures to combat the
economic fallout from the coronavirus pandemic.
   The benchmark 10-year yield was last down less
than a basis point at 0.7239%.
    "Aside from potentially seeing headlines about vaccines and
that sort of thing, stimulus is probably the most important news
item that the market is trading on," said Tom Simons, a money
market economist at Jefferies in New York. "But at this point,
it's hard to expect that anything is going to get done this year
on that."
    On Tuesday, the sides appeared to be far apart with Senate
Majority Leader Mitch McConnell announcing a vote next week by
his Republican-controlled chamber on $500 billion of targeted
aid and Democratic House Speaker Nancy Pelosi advocating much
greater spending.
    Simons said given the political impasse over stimulus, the
market will be monitoring speeches by U.S. Federal Reserve
officials on Wednesday for specific comments on policy
initiatives.
    "We've had some Fed speak here but it's mostly the same as
we've seen the last couple of weeks," he said.
    A bigger-than-expected increase in U.S. producer prices in
September did not rattle the market. The Labor Department
reported the producer price index (PPI) for final demand rose
0.4% last month after advancing 0.3% in August and was up 0.4%
in the 12 months through September.
    Economists polled by Reuters had forecast the PPI gaining
0.2% in September and rebounding 0.2% on a year-on-year basis.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was last up less
than a basis point at 0.143%.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, which is viewed as an indicator of
economic expectations, was last at 57.90 basis points, less than
a basis point lower from Tuesday's close.
    October 14 Wednesday 9:50 AM New York / 1450 GMT



                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.105        0.1065    0.001
 Six-month bills               0.115        0.1167    0.000
 Two-year note                 99-247/256   0.143     0.002
 Three-year note               99-214/256   0.1799    0.003
 Five-year note                99-186/256   0.3056    0.004
 Seven-year note               99-28/256    0.5054    0.000
 10-year note                  99-16/256    0.7239    -0.003
 20-year bond                  97-100/256   1.2743    -0.009
 30-year bond                  96-236/256   1.5034    -0.011

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap         9.00         0.25
 spread
 U.S. 3-year dollar swap         8.50         0.25
 spread
 U.S. 5-year dollar swap         7.50         0.00
 spread
 U.S. 10-year dollar swap        3.25         0.00
 spread
 U.S. 30-year dollar swap      -33.50         0.00
 spread



 (Reporting by Karen Pierog)

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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