TREASURIES-U.S. yields tumble as Evergrande fears boost safe-haven appeal

BY Reuters | TREASURY | 09/20/21 11:04 AM EDT
    (Adds open of U.S. market, fresh prices)
    By Herbert Lash
    NEW YORK, Sept 20 - U.S. Treasury yields fell on Monday as
fears that property developer China Evergrande Group (EGRNF) might
default deepened a global equity sell-off and sent investors
scurrying to shelter in safe-haven bonds.
    Treasury prices rallied, pushing yields on the benchmark
10-year note down 6 basis points to 1.306% at one
point, before shedding some price gains to trade at 1.3226%.
    Shares in Evergrande plunged as much as 19% to
more than 11-year lows, raising concerns about the health of
China's economy and its potential impact on other markets.
    Evergrande has been scrambling to raise funds to pay its
lenders, suppliers and investors, with regulators warning that
its $305 billion of liabilities could spark broader risks to the
financial system if not stabilised.
    But the severity of the risk Evergrande poses may be
overblown as many people outside of China were unfamiliar with
the company's problems before last week, said Tom Simons, money
market economist at Jefferies LLC.
    "Evergrande, frankly, to me feels more like a topic of
conservation than a salient market risk," Simons said. "At the
end of the day, China is not going to allow this to spiral out
of control."
    The 30-year Treasury bond yield dropped 4.8
basis points to 1.8605%.
    The 10-year yield on Friday hit two-month highs as investors
anticipated major central banks would start providing clues
about tapering during a busy week for policy-setters, including
the Federal Reserve's two-day meeting starting Tuesday.
    Analysts expect the Fed to open the door to reducing its
monthly bond purchases while tying any actual change to U.S. job
growth.
    "In order to get a November announcement, there probably
needs to be a hint of that in the statement that's coming out
this week," Simons said.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, fell 1.0 basis
point to 0.2158%.

      September 20 Monday 10:43AM New York / 1443 GMT
                               Price                                             Current   Net
                                                                                 Yield %   Change
                                                                                           (bps)
 Three-month bills             0.04                                              0.0406    0.003
 Six-month bills               0.045                                             0.0456    0.000
 Two-year note                 99-211/256                                        0.2158    -0.010
 Three-year note               99-194/256                                        0.4568    -0.016
 Five-year note                99-158/256                                        0.8292    -0.037
 Seven-year note               100                                               1.125     -0.042
 10-year note                  99-84/256                                         1.3226    -0.047
 20-year bond                  99-8/256                                          1.8081    -0.048
 30-year bond                  103-48/256                                        1.8605    -0.049

   DOLLAR SWAP SPREADS
                               Last (bps)                                        Net
                                                                                 Change
                                                                                 (bps)
 U.S. 2-year dollar swap        10.75                                              0.00
 spread
 U.S. 3-year dollar swap        12.00                                              0.00
 spread
 U.S. 5-year dollar swap        10.25                                             -0.25
 spread
 U.S. 10-year dollar swap        3.50                                             -0.50
 spread
 U.S. 30-year dollar swap      -23.25                                             -0.25
 spread




 (Reporting by Herbert Lash, additional reporting by Stefano
Rebaudo in London; Editing by Dhara Ranasinghe and Lisa
Shumaker)

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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