June 18, 2020 / 7:24 PM / a month ago

TREASURIES-Yields fall as coronavirus fears dent risk appetite

 (Adds detail on TIPS auction, investor comment, updates prices
and removes NEW YORK from dateline)
    By Karen Brettell and Noel Randewich
    June 18 (Reuters) - U.S. Treasury yields fell on Thursday
after cases of the novel coronavirus rose in several U.S.
states, deepening concerns that the economy may not bounce back
as quickly as hoped.
    Several U.S. states reported a surge in new COVID-19
infections on Wednesday and the daily count of infections also
hit a new benchmark in California and Texas.
    Around 400 workers also tested positive for the virus at an
abattoir in northern Germany, while a Chinese medical expert
said Beijing had brought its recent outbreak under control.

    “The focus right now is what’s going on with the virus,”
said Zach Griffiths, an interest rate strategist at Wells Fargo
in Charlotte, North Carolina. “Markets are trying to balance
some more positive economic data with virus outbreaks.”
    Benchmark 10-year Treasury yields edged lower in
afternoon trading, last down nearly four basis points at 0.694%.
They rose as high as 0.959% on June 5 after data showed that
employers unexpectedly added jobs in May, but have fallen since
as optimism over the speed of the economic recovery has ebbed.
    The yield curve between two-year and 10-year notes
 flattened four basis points to 50 basis points.
    Data on Thursday showed that initial claims for state
unemployment benefits totaled a seasonally adjusted 1.508
million for the week ended June 13, down from 1.566 million in
the prior week, and the 11th straight weekly drop after reaching
a record 6.867 million in late March.
    Factory activity in the U.S. mid-Atlantic region rebounded
sharply in June, offering hope that the manufacturing sector was
regaining its footing.
    The Treasury sold $15 billion in five-year Treasury
Inflation-Protected Securities (TIPS) at a high yield of
-0.766%.
    "The auction went relatively well," said Gennadiy Goldberg,
an interest rate strategist at TD Securities. "It shows how even
with negative real interest rates, there is still demand for an
inflation-adjusted product."
    Real interest rates reflect bond yields after adjusting for
expected inflation.
    The Treasury will also sell $134 billion in two-year,
five-year and seven-year notes next week.
    
    June 18 Thursday 3:13PM New York / 1913 GMT
                               Price                  
 US T BONDS SEP0               177-14/32    1-8/32    
 10YR TNotes SEP0              138-212/256  0-60/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.155        0.1572    -0.021
 Six-month bills               0.1725       0.175     -0.005
 Two-year note                 99-221/256   0.1953    -0.002
 Three-year note               100-22/256   0.2212    -0.005
 Five-year note                99-160/256   0.3265    -0.012
 Seven-year note               99-216/256   0.5229    -0.027
 10-year note                  99-88/256    0.6937    -0.039
 20-year bond                  98-56/256    1.2261    -0.061
 30-year bond                  94-224/256   1.4622    -0.061
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.00        -0.50    
 spread                                               
 U.S. 3-year dollar swap         4.25         0.00    
 spread                                               
 U.S. 5-year dollar swap         3.25        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -2.75         0.25    
 spread                                               
 U.S. 30-year dollar swap      -50.50         0.50    
 spread                                               
                                                      
 

    

 (Reporting by Karen Brettell and Noel Randewich; editing by
Jonathan Oatis)
  
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