TREASURIES-Yield on benchmark 10-year Treasury hits record low on virus concerns
(Updates with market activity, Treasury auction results)
By Ross Kerber
BOSTON, Feb 25 (Reuters) - The 10-year U.S. Treasury note
hit a record low yield on Tuesday as traders kept up the flight
to safety on concerns the coronavirus epidemic would have a
significant impact on global growth, coupled with soft U.S.
economic data.
The benchmark 10-year yield was down 6.5 basis
points in afternoon trading at 1.3121%, continuing declines from
Monday and reaching as low as 1.3072% a little after 2 p.m. That
was below its previous all-time low of 1.321% reached on July 6,
2016.
Yields on other treasuries were also down, as were major
U.S. stock indexes as investors moved away from riskier assets.
U.S. health officials changed their tone and alerted
Americans to begin preparing for the spread of coronavirus in
the United States. [
Dozens of countries have accelerated emergency measures to
curb the spread of the coronavirus, which has killed close to
2,700 in China - although the World Health Organization says the
outbreak there has been declining since Feb. 2.
Even before the epidemic's reach expanded, many traders had
re-evaluated expectations for global growth in 2020, John
Herrmann, director of U.S. rates strategy for MUFG Securities,
said.
Fears of the outbreak accelerated a decline in yields on
instruments such as the 10-year, which had been approaching 2%
late last year, he said.
"People had started to dial down their expectations. The
coronavirus just piled onto that as a giant risk-off trend,"
Herrmann said.
The Conference Board said its consumer confidence index
ticked up to a reading of 130.7 this month from a downwardly
revised 130.4 in January. But economists polled by Reuters had
forecast it edging up to 132.0 in February. The survey made no
mention of the coronavirus.
Although the report could be read positively, Jefferies
economist Tom Simons said investors might have been primed to
see the downside. "If you're looking for bad news, you can find
it," he said.
Trading volume on 10-year CBOE Treasury futures were set to
be the highest since at least May 2018.
The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 8 basis
points at 1.1858%.
On Tuesday afternoon the U.S. Treasury Department said it
had accepted $40 billion in bids for 2-year notes, out of $98.2
billion worth of public bids tendered, at a high yield of 1.188%
- the lowest since November of 2016.
Primary dealers accounted for 45% of competitive bids
accepted, a relatively high level that might ordinarily could
indicate weak demand for the instruments. But a continued
decline in 2-year yields suggested a different trading dynamic,
Simons said, and seemed to show traders looking for some type of
action by the U.S. central bank.
Current rates on the 2-year, he said, "signal the market is
pricing in a response from the Fed in some way."
February 25 Tuesday 2:38PM New York / 1938 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 1.5 1.5309 -0.010
Six-month bills 1.4175 1.4515 -0.028
Two-year note 100-92/256 1.1858 -0.080
Three-year note 100-178/256 1.1362 -0.083
Five-year note 101-38/256 1.1347 -0.083
Seven-year note 101-200/256 1.231 -0.073
10-year note 101-192/256 1.3121 -0.065
30-year bond 104-220/256 1.7898 -0.046
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 2.00 1.25
spread
U.S. 3-year dollar swap 1.00 1.25
spread
U.S. 5-year dollar swap -0.25 1.75
spread
U.S. 10-year dollar swap -6.25 1.25
spread
U.S. 30-year dollar swap -38.00 0.00
spread
(Reporting by Ross Kerber; Editing by Tom Brown and Alison
Williams)
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