TREASURIES-Yields show little movement despite strong 20-year auction

Kate Duguid and Ross Kerber
·3 min read

(Updates with market activity, auction results, analyst comment, Bank of Canada announcement) By Kate Duguid and Ross Kerber NEW YORK / BOSTON, April 21 (Reuters) - U.S. Treasury yields remained range-bound on Wednesday even after an auction of 20-year bonds showed strong demand, a pattern analysts expect to persist until next week's data releases and Federal Reserve meeting. Absent much economic news, the benchmark 10-year yield has languished since hitting a high of 1.776% on March 30, and this week has been bound within a range of 1.552% and 1.633%. It was last at 1.5643%, nearly unchanged for the session. In a $24 billion U.S. Treasury auction of 20-year bonds in the early afternoon, direct bidders took 20.2% of the offer. That was five percentage points more than average and the first time in the 12-month auction history of the bonds that direct bidders accounted for more than 20% of accepted bids, according to a note from DRW Trading market strategist Lou Brien, who called the demand "strong." Eric Jussaume, director of fixed income for Cambridge Trust, said the result suggested the bonds retain their appeal for non-U.S. buyers like those facing negative interest rates at home, even as the U.S. Federal Reserve signals no plan for rate hikes soon. "There’s still a lot of demand for long-end paper, especially from foreign buyers," Jussaume said. However, after the auction the yield on the bond was almost unchanged for the day like other U.S. debt, last at 2.1442%. Separately, the Bank of Canada signaled on Wednesday that it could start hiking interest rates in late 2022, as it sharply boosted its outlook for the Canadian economy and reduced the scope of its bond buying program. Wall Street's main indexes rose on Wednesday after falling for two straight sessions, as gains in mega-cap stocks more than offset a decline in Netflix following disappointing results. The two-year yield remained anchored, which also left the yield curve - as measured by the spread between two- and 10-year yields - at 141 basis points, roughly the same as Tuesday's close. "There's not much going on. The last couple of days have had no data. We've been consolidating around these levels. The next important data point is going to be the Fed. But again, we're not expecting much in the way of policy hints at next week's meeting," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. The Federal Open Market Committee will meet April 27-28 and is not expected to make any meaningful adjustments to policy. April 21 Wednesday 1:35PM New York / 1735 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0225 0.0228 -0.002 Six-month bills 0.0375 0.038 -0.005 Two-year note 99-243/256 0.1512 -0.002 Three-year note 100-42/256 0.3196 0.000 Five-year note 99-194/256 0.8001 0.005 Seven-year note 100-18/256 1.2394 0.004 10-year note 96-4/256 1.5643 0.002 20-year bond 95-172/256 2.1442 -0.003 30-year bond 91-172/256 2.2604 0.000 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.75 0.25 spread U.S. 3-year dollar swap 13.25 0.75 spread U.S. 5-year dollar swap 9.25 0.50 spread U.S. 10-year dollar swap -0.75 0.50 spread U.S. 30-year dollar swap -26.50 1.25 spread (Reporting by Kate Duguid in New York and by Ross Kerber in Boston Editing by Nick Zieminski)