TREASURIES-Yields hit four-month highs on hopes for bigger stimulus package

By Karen Brettell

NEW YORK, Oct 21 (Reuters)Benchmark U.S. Treasury yields rose to four-month highs on Wednesday on hopes that U.S. lawmakers will reach a deal to pass new fiscal stimulus in the near term.

U.S. House Speaker Nancy Pelosi said there was still a chance for a deal on fresh COVID-19 relief despite resistance from Senate Republicans, though she acknowledged it might not pass until after the election.

“Broadly speaking the rise in yields this week can be attributed to optimism on the stimulus package,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. “As time goes by it feels more and more likely it’s going to be a bigger package given that the Dems seem to be driving the discussion.”

Some investors are betting long-dated yields will rise after the Nov. 3 presidential if Democrats win a majority in the Senate and pass more stimulus than expected from Republicans.

But other Democrat policies are also viewed as potentially weighing on the economy.

“The market is at an interesting juncture where not only are there differing views about what the most likely outcome is into and through the election, but also differing views on what the market reaction should be for the same outcome,” said Michael de Pass, global head of U.S. Treasury trading at Citadel Securities.

“The broadly accepted narrative is that a Democratic sweep is going to be bearish for Treasuries, but now there are people interested in taking the other side of the argument, saying that the likely increase in regulation and taxation could be quite negative for economic growth, particularly if the fiscal stimulus is not as targeted,” de Pass said.

Benchmark 10-year note yields US10YT=RR rose two basis points on the day at 0.813% after earlier reaching 0.836%, the highest since June 9. The yield curve between two-year and 10-year notes US2US0=TWEB steepened as far as 68 basis points, the widest spread since June 8.

The Treasury Department saw solid demand for a $22 billion sale of 20-year bonds on Wednesday.

It will also sell $17 billion in five-year Treasury Inflation-Protected Securities (TIPS) on Thursday.

The U.S. economy continued to recover at a slight to modest pace through early October as consumers bought homes and increased spending, but the picture varied greatly from sector to sector, the Federal Reserve said on Wednesday.

October 21 Wednesday 3:00PM New York / 1900 GMT

Price

US T BONDS DEC0 UScv1

173-5/32

-0-11/32

10YR TNotes DEC0 TYcv1

138-148/256

-0-32/256

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.095

0.0963

-0.005

Six-month bills US6MT=RR

0.115

0.1167

0.000

Two-year note US2YT=RR

99-244/256

0.1492

0.002

Three-year note US3YT=RR

99-202/256

0.196

0.003

Five-year note US5YT=RR

99-132/256

0.349

0.006

Seven-year note US7YT=RR

98-160/256

0.5774

0.011

10-year note US10YT=RR

98-60/256

0.8125

0.016

20-year bond US20YT=RR

95-136/256

1.3836

0.020

30-year bond US30YT=RR

94-36/256

1.6237

0.021

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

8.00

-0.50

U.S. 3-year dollar swap spread

7.50

-0.50

U.S. 5-year dollar swap spread

7.50

-0.25

U.S. 10-year dollar swap spread

2.50

-0.25

U.S. 30-year dollar swap spread

-35.00

0.50

(Reporting by Karen Brettell; Editing by Tom Brown)

((karen.brettell@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

— to www.nasdaq.com

Leave a Comment

Your email address will not be published. Required fields are marked *

RSS
Follow by Email
Facebook
Twitter