TREASURIES-Yields rise on upbeat economic data, stimulus push

  • 2/3/2021
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(Recasts, updates yields, adds analyst comments) By Karen Pierog CHICAGO, Feb 3 (Reuters) - U.S. Treasury yields rose and the yield curve steepened on Wednesday amid stronger economic data and a push in Washington to pass a massive relief plan to aid the coronavirus-battered economy. The benchmark 10-year yield was last up 3.2 basis points at 1.1391%. The 30-year yield in late trade climbed to levels last seen in March 2020. It was last up 4.9 basis point at 1.9267%, while the 20-year yield hit 1.735%, its highest level since that bond maturity was relaunched in May 2020. Jim Vogel, senior rates strategist at FHN Financial in Memphis, Tennessee, said yields on the long end of the curve jumped as traders were noticing President Joe Biden"s apparent vow to keep $1,400 payments in his $1.9 trillion relief plan to fulfill his previous promises. "Volume is still light, so some of it is technical room for yields to rise in those two maturities," Vogel added. Biden told fellow Democratic in Congress on Wednesday he would not back down on including $1,400 checks for struggling Americans in his COVID-19 relief plan but would consider tighter limits on who gets them, lawmakers and aides said. After record issuance last year to fund massive federal spending in the wake of the coronavirus pandemic, the U.S. Treasury Department in its quarterly refunding announcement on Wednesday cited "sufficient capacity to address near-term projected borrowing needs" as it kept the sizes of upcoming bond and note auctions steady. Auctions set for next week total $58 billion for three-year notes, $41 billion for 10-year notes and $27 billion for 30-year bonds, unchanged from last month. "The fact they are staying flexible and not acting quickly on the idea of "oh, low rates are great, let"s borrow while we can" should be a bigger positive for Treasuries over time," Vogel said. The Treasury also said it expected the cash balance, which stood at $1.729 trillion at the end of 2020, to decline over the upcoming quarter, but that the extent of the decline would depend on factors such as the potential for additional legislation, which could include more federal spending on coronavirus relief and stimulus-related measures. Collin Martin, fixed income strategist at the Schwab Center for Financial Research in New York, said upbeat economic data drove yields higher earlier in the day, overshadowing the news that supply will not increase in the near term. Ahead of Friday"s release by the U.S. Labor Department of January employment data, the ADP National Employment Report on Wednesday showed a rebound in hiring last month, with private payrolls increasing by 174,000. Economists polled by Reuters had forecast private payrolls would rise by 49,000 in January. "That could get market participants a little bit excited about Friday"s report where maybe there could be an upside surprise. But there"s a lot of uncertainty there," Martin said. The Institute for Supply Management reported that January U.S. services industry activity increased to its highest level in nearly two years. A closely watched part of the yield curve, which measures the gap between yields on two- and 10-year Treasury notes , widened to as much as 102.2 basis points, the widest level since Jan. 12. It was last up about 3.89 basis points at 101.86 basis points. The spread between five-year notes and 30-year bonds , which is at levels last seen in 2016, was last at 146 basis points. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was last unchanged at 0.1171%. February 3 Wednesday 4:15PM New York / 2215 GMT Price Current Net Yield % Change (bps) Three-month bills 0.045 0.0456 -0.010 Six-month bills 0.0575 0.0583 -0.013 Two-year note 100-4/256 0.1171 0.000 Three-year note 99-208/256 0.1889 0.006 Five-year note 99-144/256 0.4638 0.019 Seven-year note 99-146/256 0.8134 0.024 10-year note 97-144/256 1.1391 0.032 20-year bond 94 1.7347 0.047 30-year bond 93-48/256 1.9267 0.049 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.25 0.75 spread U.S. 3-year dollar swap 9.00 0.75 spread U.S. 5-year dollar swap 11.00 0.50 spread U.S. 10-year dollar swap 6.00 1.00 spread U.S. 30-year dollar swap -23.50 0.75 spread (Reporting by Karen Pierog; Editing by Andrea Ricci and Will

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