(Adds table)
By Kate Duguid
NEW YORK, March 29 (Reuters) - Longer-dated Treasury yields
rose on Monday, steepening the yield curve, on investor optimism
about the rollout of coronavirus vaccines in the United States
and expectations that President Joe Biden's infrastructure
initiative could bolster economic growth and debt issuance.
Benchmark 10-year yields rose to a session high
of 1.728% after New York state on Monday afternoon announced
that people aged 30 and older would be eligible for coronavirus
vaccinations beginning Tuesday.
That widened the spread between two- and 10-year yields
, the most common measure of the yield curve, to
157.9 basis points, the highest in a week.
The two-year yield has remained anchored, even
with expectations of an increase in Treasury issuance, because
it moves with views on interest rates.
The Federal Reserve has pledged to keep rates near zero
until the U.S. employment situation improves dramatically. Fed
Governor Christopher Waller said on Monday that the central bank
is "a long way from raising interest rates at this point."
The expansion of eligibility in New York mirrors a ramp-up
in vaccination efforts nationwide as COVID-19 cases increase.
Biden said on Monday that 90% of adults in the United States
will be eligible to get a vaccine by April 19.
The jump in the 10-year yield on Monday suggested to some
investors that the 1.75% peak hit two weeks ago may soon be
breached.
Monday's move "undermines the prospects for 1.75% to
represent the upper-bound for now; frankly, it even introduces
the possibility the pandemic peak doesn’t survive as the Q1 line
in the sand," wrote Ian Lyngen, head of U.S. rates strategy at
BMO Capital Markets.
"It will be an area to monitor as reopening optimism has
been extended with Biden’s announcement that 90% of U.S. adults
will be eligible for the vaccine by April 19," said Lyngen.
Also pushing yields higher was the expected announcement of
Biden's multitrillion-dollar infrastructure spending plan on
Wednesday in Pittsburgh.
"There's a lot of apprehension about what President Biden is
going to announce on Wednesday and whether that will push up
deficits materially in the years to come. That, I think, is
weighing on markets," said Gennadiy Goldberg, senior U.S. rates
strategist at TD Securities.
The Treasury market on Monday was little moved by the
fallout from losses at Archegos Capital Management, which
triggered a fire sale of stocks on Friday.
"The hedge fund issue ... you wouldn't typically have rates
selling off into that, you'd have a flight to safety because
people would be closing out their equity positions," Goldberg
said.
March 29 Monday 4:58PM New York / 2058 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.0175 0.0177 -0.002
Six-month bills 0.0375 0.038 0.003
Two-year note 99-247/256 0.1426 0.002
Three-year note 99-204/256 0.319 0.013
Five-year note 99-82/256 0.8893 0.033
Seven-year note 99-56/256 1.3674 0.042
10-year note 94-180/256 1.7099 0.050
20-year bond 93-44/256 2.305 0.040
30-year bond 88-176/256 2.4081 0.041
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 12.50 0.50
spread
U.S. 3-year dollar swap 14.75 0.75
spread
U.S. 5-year dollar swap 10.00 0.50
spread
U.S. 10-year dollar swap 2.25 -0.50
spread
U.S. 30-year dollar swap -24.00 -0.50
spread (Reporting by Kate Duguid; Editing by Will Dunham and Jonathan
Oatis)
source: reuters.com