July 28, 2020 / 6:32 PM / 16 days ago

TREASURIES-Yields lower as investors await Washington relief deal

 (Updates with market activity, analyst comment, 7-year note
auction result)
    By Ross Kerber
    July 28 (Reuters) - U.S. Treasury yields fell on Tuesday as
investors waited for Washington lawmakers to reach a deal on
coronavirus relief and took stock of mixed corporate earnings.
    The benchmark 10-year yield was down 2.7 basis
points at 0.5823% in afternoon trading, after reaching as high
as 0.637% in the session.
    Yields declined as traders shifted back into safe-haven
securities and away from riskier bets on stocks, and a gold
rally also fizzled, said FHN Financial interest rate strategist
Jim Vogel.
    "There's been a big decline in momentum in speculative ideas
like gold and some earnings disappointments," he said. Yields
also ticked down after the U.S. Federal Reserve said it would
extend several lending facilities.
    U.S. Senate Republicans announced on Monday a $1 trillion
coronavirus aid package hammered out with the White House, but
the proposal sparked immediate opposition. 
    A lack of progress will keep lowering bond yields, said DRW
Trading strategist Lou Brien, as an approaching end of
unemployment benefits threatens to set back the economy. 
    "The longer they go without coming to an agreement, the
better the underlying bid will be" for Treasuries, Brien said.
    U.S. stocks fell, with the blue-chip Dow Jones industrial
average weighed down by 3M Co and McDonald's Corp
 shares after the companies posted quarterly profits that
missed estimates.
    The U.S. Treasury Department sold $44 billion of 7-year
notes at auction at a high yield of 0.446%. 
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 44 basis points, about 3 basis points below
Monday's close.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 1.3
basis points at 0.1426%.
    
    July 28 Tuesday 2:02PM New York / 1802 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.11         0.1116    0.000
 Six-month bills               0.125        0.1272    -0.005
 Two-year note                 99-247/256   0.1426    -0.013
 Three-year note               99-226/256   0.1647    -0.018
 Five-year note                99-234/256   0.2673    -0.023
 Seven-year note               100-112/256  0.4358    -0.023
 10-year note                  100-104/256  0.5823    -0.027
 20-year bond                  102-24/256   1.008     -0.032
 30-year bond                  100-172/256  1.223     -0.029
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.25         1.00    
 spread                                               
 U.S. 3-year dollar swap         5.75         1.25    
 spread                                               
 U.S. 5-year dollar swap         3.50         0.25    
 spread                                               
 U.S. 10-year dollar swap       -1.00         0.00    
 spread                                               
 U.S. 30-year dollar swap      -41.00         0.25    
 spread                                               
                                                      
 
 (Reporting by Ross Kerber in Boston
Editing by Nick Zieminski and Richard Chang)
  
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