Skip to main content

TREASURIES-Yields end little changed after mixed data, COVID concerns remain

 (Adds auction outlook, Powell comment, updates prices)
    By Karen Brettell
    NEW YORK, Aug 17 (Reuters) - U.S. Treasury yields ended
Tuesday little changed in choppy trading after data showed a
mixed picture of the U.S. economy and as investors remained
concerned about slowing global growth and the spread of COVID-19
    Yields rose after data showed that U.S. retail sales fell
1.1% in July, more than economists expected. Industrial
production numbers, however, showed that output at U.S.
factories surged in July.
    “It was a bit of a counterintuitive reaction, perhaps the
market was expecting an even weaker print on retail sales,” said
Gennadiy Goldberg, an interest rate strategist at TD Securities
in New York, noting that industrial production “came out
stronger and pushed yields higher" after the initial jump.
    Benchmark 10-year note yields were last at
1.258%, little changed on the day, after earlier falling as low
as 1.217%. Analysts said that trading has been volatile with
many investors and traders on holiday for the second half of
    Yields increased early in the New York session on both
Monday and Tuesday, following an overnight rally, which may
reflect a pattern or a more optimistic economic outlook by U.S.
    “We missed on retail sales and had the retracement of the
overnight rally, it was the same as yesterday. I think that was
perhaps in some investors’ minds as we open the N.Y. session
that this would be faded to some degree during the U.S. hours,”
said Michael Lorizio, senior fixed income trader at Manulife
Investment Management in Boston.
    Yields fell on Monday on disappointing Chinese economic
data, and after the Taliban took over Afghanistan's capital
Kabul. The spread of coronavirus variants has also raised doubts
that businesses will be able to normalize as quickly as
previously expected.
    “The US 10-year is here for a reason. The global economy has
slowed/is slowing. The virus has renewed global supply chain
issues. They are real. China is locking down, and the US
consumer is showing signs of hesitancy as we get ready to reopen
schools,” Gregory Faranello, head of U.S. rates at AmeriVet
Securities, said in a report.
    It remains unclear whether the heightened outbreak of the
coronavirus Delta variant will have a noticeable impact on the
economy, Federal Reserve Chair Jerome Powell said on Tuesday.

    Investors are also weighing how the Fed’s expected taper of
bond purchases will affect yields. Some economists and analysts
think the U.S. central bank could announce the move as soon as
September, though others say it is unlikely until December.
    The Treasury is expected to cut issuance as it moves past
large COVID-19-related spending, which could offset some of the
impact of the Fed cutting bond purchases.
    “It’s going to be occurring at a time when supply across the
entire curve will be reduced to some degree by the Treasury, so
I think there are a lot of factors that make the taper less of a
concern in terms of the technical impact on the bond market,”
said Lorizio.
    The Fed will release minutes from its July meeting on
    The Treasury will sell $27 billion in 20-year bonds on
Wednesday and $8 billion in 30-year Treasury Inflation-Protected
Securities (TIPS) on Thursday.
      August 17 Tuesday 3:02PM New York / 1902 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.0725       0.0735    -0.001
 Six-month bills               0.0525       0.0532    0.000
 Two-year note                 99-211/256   0.2153    0.010
 Three-year note               99-218/256   0.425     0.011
 Five-year note                99-84/256    0.7635    0.012
 Seven-year note               99-188/256   1.0397    0.006
 10-year note                  99-236/256   1.2583    0.001
 20-year bond                  107-60/256   1.8124    -0.007
 30-year bond                  101-216/256  1.9189    -0.005
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         9.25         0.50    
 U.S. 3-year dollar swap        10.25         0.50    
 U.S. 5-year dollar swap         8.00         0.00    
 U.S. 10-year dollar swap        0.75         0.50    
 U.S. 30-year dollar swap      -29.75         1.00    
 spread (Reporting by Karen Brettell; editing by Jonathan Oatis and
Chizu Nomiyama)

By: Karen Brettell
Read more at: