Yields dip as market takes a breather from run up

CHICAGO: US Treasury yields were lower on Monday as the market took a pause from last week's dramatic rise and ahead of another spate of supply.

The benchmark 10-year yield was last down 2.6 basis points at 0.8785pc.

Yields spiked on Friday in the wake of a better-than-expected May unemployment report with the 10-year note yield rising above 0.9pc for the first time since March 20.

"After such a significant move last week, it wouldn't necessarily be surprising to see a little bit of a breather or at least a more gradual move here," said Bill Merz, head of fixed income research at US Bank Wealth Management in Minneapolis.

Later on Monday, the Treasury will sell $44 billion of three-year notes as it continues to finance massive stimulus spending to combat the economic fallout of the coronavirus outbreak.

Merz said with the Federal Reserve in near-full control of the front end of the yield curve, the notes should be able to be "digested relatively easily."

Other sales this week include $29 billion of 10-year notes on Tuesday and $19 billion of 30-year bonds on Thursday.

Also looming this week is a two-day Fed meeting.

While no major policy decisions are expected, the central bank will issue its first economic projections since December.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was last down 1.2 basis points at 0.2043pc.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes that is seen as an indicator of economic expectations was at about 67 basis points, roughly 1 basis point lower than at Friday's close.

Bids submitted in a Monday morning overnight repurchase agreement (repo) operation totaled $67.05 billion, according to the New York Federal Reserve, which said it accepted all the bids.

Another $53.2 billion in bids were submitted and accepted in a 29-day repo operation.