TREASURIES-Longer-term yields climb as investors embrace risk

Karen Pierog
·3 min read

(Updates yields, adds impact from Yellen's expected nomination) By Karen Pierog CHICAGO, Nov 24 (Reuters) - U.S. Treasury yields on the longer end of the curve rose on Tuesday as investors rushed to riskier investments, including soaring stocks. The benchmark 10-year yield, which hit a session high of 0.888%, was last up 2.4 basis points at 0.8832% and the yield curve steepened. The yield on 30-year bonds was last up 4.4 basis points at 1.6072%. Stan Shipley, fixed-income strategist at Evercore ISI in New York, said investors, driven by hopes of a closer economic recovery, were ditching the safe haven of Treasuries for riskier commodities and stocks. "With yields of 85 or 88 basis points, that's not very attractive on the 10-year (note), and (people are) going to look for returns elsewhere," he said. President-elect Joe Biden's expected nomination of former Federal Reserve Chair Janet Yellen as Treasury secretary raised investor hopes for passage of a potential fiscal stimulus package and contributed to the weakness in long-dated Treasuries and the steepening of the yield curve. Progress on coronavirus vaccines, along with the commencement of Biden's transition process three weeks after the election, pushed stocks higher and lifted the Dow Jones Industrial Average over the 30,000 mark for the first time. Market positioning ahead of Thursday's Thanksgiving holiday was also a factor, according to Tom Simons, money market economist at Jefferies in New York. "Nobody wants to be still holding onto big short positions," he said. On the auction front, the U.S. Treasury sold $56 billion of seven-year notes at a high yield of 0.653% and with a bid-to-cover ratio of 2.37. The offering followed auctions of two- and five-year notes on Monday. Simons said the seven-year note auction went "pretty well." "This one was slightly better than average and yesterday's (five-year note auction) was slightly worse than average," he said. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was last down less than a basis point at 0.1641%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was last at 71.90 basis points, 2.8 basis points higher than Monday's close. November 24 Tuesday 4:21PM New York / 2221 GMT Price Price Current Net Yield % Change (bps) Three-month bills 0.085 0.0864 -0.003 Six-month bills 0.09 0.0913 0.000 Two-year note 99-236/256 0.1641 -0.005 Three-year note 100-26/256 0.2157 -0.005 Five-year note 99-226/256 0.3987 0.004 Seven-year note 99 0.6478 0.014 10-year note 99-236/256 0.8832 0.024 20-year bond 99-140/256 1.4011 0.039 30-year bond 100-108/256 1.6072 0.044 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 9.25 0.75 spread U.S. 3-year dollar swap 8.50 1.00 spread U.S. 5-year dollar swap 6.25 -0.25 spread U.S. 10-year dollar swap 0.00 0.50 spread U.S. 30-year dollar swap -31.75 0.00 spread (Reporting by Karen Pierog; Editing by Lisa Shumaker and Alistair Bell)