June 15, 2020 / 7:59 PM / 19 days ago

TREASURIES-Yields rise as Fed expands corporate bond purchases, boosting risk appetite

 (Recasts with price move, adds quote, updates prices)
    By Karen Brettell
    NEW YORK, June 15 (Reuters) - U.S. Treasury yields rose on
Monday as stocks recovered from earlier losses and after the
Federal Reserve said it would expand its purchases of corporate
bonds, boosting risk appetite.
    The Fed said it would buy corporate bonds in the secondary
market, aiming to create a portfolio that is based on a broad,
diversified market index.
    “The price action in the Treasury market reflects the Fed’s
willingness to continue to expand its balance sheet to the
benefit of spurring economic growth,” said Ian Lyngen, head of
U.S. rates strategy at BMO Capital Markets in New York.
    Benchmark 10-year note yields gained one basis
point to 0.708%. They have fallen from an 11-week high of 0.959%
on June 5, when data showed that employers unexpected added jobs
in May.
    Yields had fallen earlier on Monday as stocks swooned on
renewed concerns over the spread of the coronavirus.
    Beijing saw an unexpected spike in cases, while new cases
and hospitalizations swept through more U.S. states, including
Florida and Texas.
    The Fed last week signaled it plans years of extraordinary
support for the economy with policymakers projecting the economy
to shrink 6.5% in 2020 and the unemployment rate to be 9.3% at
year's end.
    Fed Chair Jerome Powell is expected to repeat this message
when he testifies before Congress on Tuesday and Wednesday.
    The yield curve between two-year and 10-year
notes steepened one basis point on the day to 52 basis points.
The curve between 10-year notes and 30-year bonds
 flattened one basis point to 74 basis points and
is down from 83 basis points on June 5, the steepest since
March.
    NatWest Markets sees the curve between 10-year notes and
30-year notes as likely to resteepen as the Treasury increases
the supply of long-dated debt.
    “We thought the Fed might want to make a stronger commitment
to making it clear that they would make purchases in the long
end of the curve, and we didn’t get that,” said John Roberts, an
interest rate strategist at NatWest.
    The Fed said it would keep the size of its bond purchase
program unchanged, but did not detail where it would focus the
purchases.
    The Treasury will sell $17 billion in 20-year bonds on
Wednesday.
    
    June 15 Monday 3:45PM New York / 1945 GMT
                               Price                  
 US T BONDS SEP0               177-5/32     -0-1/32   
 10YR TNotes SEP0              138-172/256  -0-16/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.165        0.1678    0.003
 Six-month bills               0.185        0.1877    0.003
 Two-year note                 99-224/256   0.189     -0.002
 Three-year note               100-20/256   0.2238    0.003
 Five-year note                99-152/256   0.3327    0.007
 Seven-year note               99-184/256   0.5412    0.007
 10-year note                  99-52/256    0.7084    0.009
 20-year bond                  98-4/256     1.2377    0.006
 30-year bond                  95-16/256    1.4541    0.007
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.00        -0.25    
 spread                                               
 U.S. 3-year dollar swap         4.75         0.00    
 spread                                               
 U.S. 5-year dollar swap         4.50         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.50        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -49.00        -0.50    
 spread                                               
                                                      
 
 (Reporting by Karen Brettell; editing by Nick Zieminski and
Jonathan Oatis)
  
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