(Recasts, updates yields, adds auctions and analyst comments)
By Karen Pierog
CHICAGO, Feb 18 (Reuters) - U.S. Treasury yields turned
lower on Thursday as risk appetite waned, pushing Wall Street
stock indexes down, while the latest debt auction had a weak
showing.
The benchmark 10-year yield, which touched
1.333% on Wednesday, its highest level since Feb. 27, 2020, was
last down 1.3 basis points at 1.2855%.
"Today, I think it has to do with weakness in equities,"
said Andrew Brenner, head of international fixed income at
NatAlliance, pointing to the reason for the downward shift in
yields.
Wall Street's main indexes fell with investors moving out of
big technology firm stocks and as an unexpected rise in weekly
jobless claims indicated a fragile labor market recovery.
The Treasury market has been choppy after a runup in
longer-dated yields so far this year "caught a lot of people
offside," according to Brenner.
Tony Rodriguez, head of fixed income strategy at Nuveen,
said the market was establishing a new trading range, partly in
response "to much greater growth prospects."
He added that the 10-year yield is resetting and could
eventually climb to the 1.5% to 2% range.
"Anywhere in there towards the end of the year is consistent
with better growth, an economy that's moving forward in terms of
opening up because the (COVID-19) vaccine is rolling out, and
more importantly, that's not a problematic level for the
non-Treasury markets: equities, credit spreads, etcetera,"
Rodriguez said.
Meanwhile, the two-year Treasury yield, the
security most sensitive to interest rate expectations, fell to
0.105%, matching a record low reached on Feb. 8. It was last
down less than a basis point at 0.1089%.
Rodriguez said that while there was some technical potential
for the two-year yield to fall further, the probability of that
was low.
The 30-year Treasury Inflation-Protected Securities (TIPS)
yield spiked to -0.050%, its highest level since
June, after a weak auction of $9 billion of the securities. The
yield was last at -0.060%.
The auction ended with a high yield of -0.040% and a
below-average bid-to-cover ratio of 2.31 times.
The 30-year Treasury yield, which hit a one-year
high of 2.112% on Wednesday, turned higher for the session after
the auction and was last up less than a basis point at 2.0745%.
The Treasury Department announced it will auction $60
billion of two-year notes, $61 billion of five-year notes and
$62 billion of seven-year notes next week.
On the data front, the U.S. Labor Department reported
initial claims for state unemployment benefits totaled a
seasonally adjusted 861,000 for the week ended Feb. 13, compared
with 848,000 in the prior week. Economists polled by Reuters had
forecast 765,000 applications in the latest week.
A closely watched part of the yield curve, which measures
the gap between yields on two- and 10-year Treasury notes
, was last less than a basis point steeper at 117.66
basis points.
The spread between five-year notes and 30-year bonds
, which is at its widest levels since 2015, was last
about 3.7 basis points steeper at 152.57 basis points.
February 18 Thursday 3:00PM New York / 2100 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.0375 0.038 -0.003
Six-month bills 0.04 0.0406 -0.015
Two-year note 100-8/256 0.1089 -0.002
Three-year note 99-196/256 0.2037 -0.007
Five-year note 99-40/256 0.5481 -0.018
Seven-year note 98-208/256 0.9269 -0.015
10-year note 98-128/256 1.2855 -0.013
20-year bond 99-104/256 1.9109 -0.011
30-year bond 95-144/256 2.0745 0.006
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 9.00 0.00
spread
U.S. 3-year dollar swap 10.00 0.25
spread
U.S. 5-year dollar swap 12.25 0.25
spread
U.S. 10-year dollar swap 7.50 0.00
spread
U.S. 30-year dollar swap -21.25 -0.75
spread (Reporting by Karen Pierog; editing by Jonathan Oatis)
