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Markets

Longer-term yields inch lower as new supply looms

  • The benchmark 10-year yield was last down 1 basis point at 0.6184%.
  • "As Wall Street started to improve and the NASDAQ has really jumped, we saw some of the bid come out of Treasuries," she said.
21 Jul, 2020

CHICAGO: US Treasury yields on the long end of the curve were a touch lower on Monday amid strengthening stocks and ahead of new supply this week.

The benchmark 10-year yield was last down 1 basis point at 0.6184%.

Kim Rupert, senior economist at Action Economics in San Francisco, said Treasuries were trading in a narrow range as they tracked equities "a little bit."

"As Wall Street started to improve and the NASDAQ has really jumped, we saw some of the bid come out of Treasuries," she said.

Risk appetite has seesawed as investors weigh a rise in the number of US coronavirus cases, deaths, hospitalizations, and rates of positive test results against promising vaccine developments.

On the supply front, the Treasury Department will sell $17 billion of 20-year bonds on Wednesday and $14 billion of 10-year Treasury-Inflation Protected Securities (TIPS) on Thursday.

Bill Merz, head of fixed income research at US Bank Wealth Management in Minneapolis, said the Treasury market was able to get through massive supply earlier this year "with minimal disruption and minimal volatility" in yields.

"That gives us confidence that what we're likely to see here in the next couple of months in terms of issuance is not going to be a major event for the market," he said. Also this week, negotiations over a new round of stimulus payments to prop up the coronavirus-hit economy will be the focus in the US Congress.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 0.1492%.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, which is viewed as an indicator of economic expectations, was at 46.80 basis points, about a basis point lower than at Friday's close.

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