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Yields drop as coronavirus worries return

(Adds detail on prices, auction, comment from investors, previous BOSTON) By Noel Randewich and Ross Kerber July 7 (Reuters) – U.S. Treasury yields fell on Tuesday as a worsening COVID-19 caseload aggravated concerns about reopening businesses too quickly. The benchmark 10-year yield was down 3.3 basis points in afternoon trading at 0.6512%. Wall Street’s main indexes dipped a day after the benchmark S&P 500 logged its longest streak of gains this year. Treasury yields had risen on Monday, but Tuesday’s trading showed investors remain concerned about the U.S. economic outlook. “It’s today’s downturn in the Dow and S&P 500 that is giving Treasuries a bit of a safe-haven bid,” said Kim Rupert, senior economist at Action Economics in San Francisco. “It’s mostly a COVID bid.” On Monday, Florida’s greater Miami area became the latest coronavirus hot spot to roll back its reopening, ordering restaurant dining closed, as COVID-19 cases surged nationwide and the U.S. death toll topped 130,000. Oil prices also fell on Tuesday on concerns a surge in new virus cases will hamper a recovery in fuel demand. The yield on three-year notes was down less than a basis point at 0.1886% after the U.S. government auctioned $46 billion of them, part of a drastically increased series of debt auctions to fund trillions of dollars in stimulus aimed at protecting the economy from the pandemic.” Non-dealers accounting for 67.6% of bids accepted in the auction, higher than the average of 62.8% in other auctions and indicating good demand, said BMO Capital Markets strategist Ben Jeffery in a note to clients. He added the high yield of 0.19% was the lowest at which three-year notes have been issued, reflecting how yields on all Treasuries are far below where they stood at the start of 2020. 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 at 49 basis points, about 3 basis points lower than Monday’s close and in line with its level since mid-June. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 0.1626%. July 7 Tuesday 2:08 pm New York / 1808 GMT Price Yield Yield Change Three-month bills 0.145 0.1475 -0.008 Six-month bills 0.1625 0.1649 -0.002 Two-year note 99-237/256 0.1626 0.002 Three-year note 100-46/256 0.1886 -0.002 Five-year note 99-200/256 0.2943 -0.013 Seven-year note 100-20/256 0.4886 -0.022 10-year note 99-192/256 0.6512 -0.033 20-year bond 99-96/256 1.1603 -0.047 30-year bond 96-116/256 1.3957 -0.046 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap spread 5.50 -0.75 U.S. 3-year dollar swap spread 3.75 -0.50 U.S. 5-year dollar swap spread 2.50 -0.25 U.S. 10-year dollar swap spread -3.00 0.00 U.S. 30-year dollar swap spread -49.50 0.25 (Reporting by Ross Kerber in Boston; Editing by Bernadette Baum and Alistair Bell)

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