TREASURIES-Yields edge up as safe-haven buying sputters

BY Reuters | TREASURY | 10/15/20 03:51 PM EDT
    (Corrects 10-year Treasury yield in paragraph 2)
    By Karen Pierog
    CHICAGO, Oct 15 (Reuters) - U.S. Treasury yields edged
higher on Thursday, changing direction after an earlier
safe-haven rally sparked when jobless claims notched an
unexpected climb.
    The benchmark 10-year yield was last 0.7306%.
    Guy LeBas, chief fixed income strategist at Janney Capital
Management in Philadelphia, said the session's earlier risk-on
tone switched to risk off as Wall Street pared losses.
    "You see it in the pretty substantial reversal after a big
morning rally in Treasuries," he said.
    Yields on the longer end of the curve dropped to session
lows after the U.S. Labor Department reported initial claims for
state unemployment benefits 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.
    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.
    On the stimulus front, President Donald Trump said on he was
willing to raise his offer of $1.8 trillion to win support of
Congressional Democrats. Trump's fellow Republican, Senate
Majority Leader Mitch McConnell, said an aid package would be
passed eventually, but the president's latest offer would be a
tough sell to his members.
    The coming week will bring more supply to the market, with
$22 billion of 20-year bonds set for auction on Oct. 21 and $17
billion of Treasury Inflation-Protected Securities (TIPS)
selling on Oct. 22.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was at 0.1370%,
vs 0.1390% late Wednesday.
    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 57.2 basis points, down from
Wednesday's close.
     October 15 Thursday 3:33PM New York / 1933 GMT
 US T BONDS DEC0               175-2/32     -0-10/32
 10YR TNotes DEC0              139-24/256   -0-32/25
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.1025       0.104     -0.002
 Six-month bills               0.1175       0.1192    0.002
 Two-year note                 99-248/256   0.141     0.002
 Three-year note               99-214/256   0.1799    0.005
 Five-year note                99-174/256   0.3152    0.013
 Seven-year note               99-2/256     0.5204    0.016
 10-year note                  98-240/256   0.7372    0.015
 20-year bond                  97-32/256    1.2897    0.017
 30-year bond                  96-148/256   1.518     0.019

                               Last (bps)   Net
 U.S. 2-year dollar swap         9.00         0.00
 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      -34.25        -0.50

 (Reporting by Karen Pierog;
Editing by Bernadette Baum and David Gregorio)

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