TREASURIES-Yields rise as stimulus hopes boosts risk appetite

BY Reuters | TREASURY | 10/19/20 09:49 AM EDT
       By Karen Brettell
    NEW YORK, Oct 19 (Reuters) - U.S. Treasury yields rose
towards the top end of their recent range on Monday as optimism
that lawmakers will reach a new stimulus deal boosted
risk-taking and reduced demand for the safe-haven bonds.
    Stocks opened higher on hopes of a coronavirus vaccine by
year-end, while investors were also encouraged by signs an
agreement in Washington on a fiscal package could be reached
soon.
    House Speaker Nancy Pelosi said on Sunday that differences
remained with President Donald Trump's administration on a
wide-ranging coronavirus relief package but that she was
optimistic legislation could be pushed through before Election
Day.
    ?It?s just continued 'risk on' in the equity markets, and
also we?re getting news that in the next 48 hours Pelosi and
Treasury Secretary (Steven) Mnuchin are looking at a stimulus
package, so I think that?s one of the reasons that the market is
selling off to higher yields,? said Tom di Galoma, a managing
director at Seaport Global Holdings in New York.
    Benchmark 10-year note yields were last up three
basis points higher on the day at 0.771%. The yields have traded
in a tight range from 0.50% to 0.80% since April, with the
exception of a brief spike to 0.96% in early June.
    Some investors are betting long-dated yields will rise after
the Nov. 3 presidential election on the likelihood of greater
fiscal spending to boost the economy, with Democrats expected to
support a larger package if they win a majority in the Senate.
    Ongoing weakness from Covid-related business disruptions,
however, could also keep rates near historical lows, with the
Federal Reserve also likely to act to keep rates low unless the
economy shows improvement.
    "The economic destruction from Covid, in my view, will keep
rates pretty low,? said di Galoma.
    The Treasury Department will sell $22 billion in 20-year
bonds on Wednesday and $17 billion in five-year Treasury
Inflation-Protected Securities (TIPS) on Thursday.

    October 19 Monday 9:32AM New York / 1332 GMT
                               Price
 US T BONDS DEC0               174-8/32     -0-21/32
 10YR TNotes DEC0              138-216/256  -0-56/25
                                            6
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0975       0.0989    0.003
 Six-month bills               0.115        0.1167    0.000
 Two-year note                 99-243/256   0.1512    0.006
 Three-year note               99-206/256   0.1906    0.008
 Five-year note                99-148/256   0.3361    0.018
 Seven-year note               98-210/256   0.5483    0.023
 10-year note                  98-160/256   0.7706    0.027
 20-year bond                  96-132/256   1.3255    0.030
 30-year bond                  95-160/256   1.559     0.030

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap         8.00        -0.50
 spread
 U.S. 3-year dollar swap         7.75        -0.25
 spread
 U.S. 5-year dollar swap         7.25        -0.25
 spread
 U.S. 10-year dollar swap        2.50         0.00
 spread
 U.S. 30-year dollar swap      -35.50         0.50
 spread




 (Editing by Nick Zieminski)

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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