TREASURIES-Yields hold below four-month highs, stimulus in focus

BY Reuters | TREASURY | 10/22/20 09:28 AM EDT
       By Karen Brettell
    NEW YORK, Oct 22 (Reuters) - Benchmark U.S. Treasury yields
rose on Thursday, but held just below four-month highs as
investors waited on whether lawmakers will agree to pass new
stimulus before the Nov. 3 presidential election.
    High-level negotiations on a new coronavirus aid bill faced
a setback on Wednesday when President Donald Trump accused
Democrats of being unwilling to craft an acceptable compromise,
despite reports of some progress earlier in the day.

    U.S. House Speaker Nancy Pelosi on Thursday said negotiators
were making progress in ongoing talks and that legislation could
be hammered out "pretty soon."
    ?It feels like we?re just consolidating, it's headline
driven at this point,? said Justin Lederer, an interest rate
strategist at Cantor Fitzgerald in New York.
    Benchmark 10-year note yields rose one basis
point on the day to 0.824% after reaching a high of 0.836% on
Wednesday, the highest since June 9. The yield curve between
two-year and 10-year notes was little changed on
the day at 67 basis points, after reaching 68 basis points on
Wednesday, the steepest since June 8.
    Some investors are betting that long-dated yields will rise
after the Nov. 3 vote if Democrats win a majority in the Senate
and pass more stimulus than is expected from Republicans.
    But a global demand for yield is likely to lead buyers to
step in if yields rise too far. The Federal Reserve is also
expected to shift its bond purchases to include more
longer-dated debt if any yield increases are not backed by
significant economic improvement.
    Yields rose slightly on Thursday after data showed the
number of Americans filing new claims for jobless benefits
declined more than expected last week, though they remain
extremely high.
    The Treasury Department will sell $17 billion in five-year
Treasury Inflation-Protected Securities (TIPS) on Thursday. It
saw solid demand for a $22 billion sale of 20-year bonds on

      October 22 Thursday 9:24AM New York / 1324 GMT
 US T BONDS DEC0               172-28/32    -0-7/32
 10YR TNotes DEC0              138-124/256  -0-24/25
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.09         0.0913    -0.005
 Six-month bills               0.1125       0.1141    -0.003
 Two-year note                 99-244/256   0.1493    0.000
 Three-year note               99-200/256   0.1987    0.003
 Five-year note                99-122/256   0.357     0.006
 Seven-year note               98-140/256   0.5891    0.009
 10-year note                  98-32/256    0.8243    0.008
 20-year bond                  95-96/256    1.3929    0.006
 30-year bond                  93-240/256   1.6326    0.004

                               Last (bps)   Net
 U.S. 2-year dollar swap         8.50         0.25
 U.S. 3-year dollar swap         7.50         0.00
 U.S. 5-year dollar swap         7.25        -0.25
 U.S. 10-year dollar swap        2.50        -0.25
 U.S. 30-year dollar swap      -34.75         0.25

 (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.

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.