TREASURIES-Yields trend lower with boost in safe-haven demand

BY Reuters | TREASURY | 10/15/20 10:16 AM EDT
       By Karen Pierog
    CHICAGO, Oct 15 (Reuters) - U.S. Treasury yields edged lower
on Thursday as investors fled risk amid rising coronavirus
cases, an unexpected jump in new jobless claims, and uncertainty
over another round of fiscal stimulus to boost the economy.
   The benchmark 10-year yield was last down less
than a basis point at 0.7157%.
    Tony Rodriguez, head of fixed income strategy at Nuveen,
said the global rise in virus cases and a lack of more fiscal
aid for the U.S. economy were center stage in the market.

    "Both of those being obviously negative for near-term
growth," he said, adding that a sell-off in risk markets sparked
Treasury buying, pushing yields lower.
    U.S. Treasury Secretary Steve Mnuchin said on Thursday that
he will keep working on reaching a stimulus deal with Democratic
House Speaker Nancy Pelosi before the Nov. 3 election.

    But Rodriguez said Republican senators remain an impediment
to getting a deal done. Senate Majority Leader Mitch McConnell
has said his chamber would vote on a slimmed-down $500 billion
COVID-19 bill next week.
    Adding to economic worries was Thursday's U.S. Labor
Department report on initial claims for state unemployment
benefits, which totaled a seasonally adjusted 898,000 for the
week ended Oct. 10, compared to 845,000 in the prior week.
Economists polled by Reuters had forecast 825,000 applications
in the latest week.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was last down
less than a basis point at 0.137%.
    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 57.50 basis points, 1 basis
point lower from Wednesday's close.
October 15 Thursday 9:52AM New York / 1452 GMT

                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.1          0.1014    -0.005
 Six-month bills               0.11         0.1116    -0.005
 Two-year note                 99-250/256   0.137     -0.002
 Three-year note               99-220/256   0.1721    -0.003
 Five-year note                99-192/256   0.3009    -0.001
 Seven-year note               99-36/256    0.5009    -0.003
 10-year note                  99-36/256    0.7157    -0.006
 20-year bond                  97-164/256   1.2598    -0.013
 30-year bond                  97-80/256    1.4868    -0.012

                               Last (bps)   Net
 U.S. 2-year dollar swap         8.75        -0.25
 U.S. 3-year dollar swap         8.50         0.00
 U.S. 5-year dollar swap         8.00         0.50
 U.S. 10-year dollar swap        3.50         0.25
 U.S. 30-year dollar swap      -33.50         0.25

 (Reporting by Karen Pierog;
Editing by Bernadette Baum)

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.

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