TREASURIES-U.S. yields little changed to higher; focus on stimulus checks - Reuters

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    * Markets bet bill on $2,000 aid check will not pass in
Senate
    * U.S. yield curve modestly steeper
    * U.S. 7-year note auction shows lackluster results
    * German, Italian 10-year yields flat on day in thin trade

 (Adds comment, Italian and German yields, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 29 (Reuters) - U.S. Treasury yields were flat
to modestly higher on Tuesday in thin trading as U.S. stocks
surrendered gains, with investors betting a heftier federal
stimulus check was unlikely to get the nod in the Republican-led
U.S. Senate.
    Legislation on a $2,000 stimulus check is in the Senate's
hands on Tuesday after President Donald Trump signed a $2.3
trillion pandemic aid and spending package on Sunday.
    Risk appetite ebbed during the latest hour, with yields
turning lower for some maturities, as investors digested
comments from congressional leaders on the hotly debated
stimulus.
    U.S. Senate Majority Leader Mitch McConnell on Tuesday
blocked immediate consideration of a measure to increase
COVID-19 relief payments to $2,000, but he suggested the Senate
would at least examine the issue.
    "The wall among Senate Republicans to stick to $600 impact
payments is cracking, but the majority leader could have the
cement to hold it together," said Jim Vogel, senior rates
strategist at FHN Financial in Memphis, Tennessee, in his latest
research note.
    "Time is running out, maybe," he added. 
    As this developed, the Treasury's U.S. 7-year note auction,
the last coupon supply for 2020, showed tepid results, weighed
down by the increase in auction size, and in line with the
underwhelming outcomes for the 2-year and 5-year offerings on
Monday.
    The high yield was at 0.662%, slightly higher than the
"when-issued" or expected level of around 0.660% at the bid
deadline, which meant investors demanded a little more yield to
own the paper.
    There were $136.6 billion in bids for a 2.31 bid-to-cover
ratio, a gauge of demand. That ratio was lower than last month's
2.37 and the 2.47 average, according to analysts. Indirect
bidders, which include foreign central banks, took 60.3% of
supply, lower than November's 65.4% uptake, and the 63.1%
average.
    The U.S. yield curve was slightly steeper on the day, with
the overall steepening trend still intact amid increased risk
appetite trending the last few sessions, as well as expectations
of higher inflation. The yield spread between 2-year and 10-year
notes was last at 80.60 basis points.
    Last week, that curve hit its widest in more than three
years. Since late July, the gap between U.S. 2-year and 10-year
yields has widened by roughly 50 basis points.
    In afternoon trading, the U.S. benchmark 10-year yield
 was flat at 0.934%, from 0.933% late on Monday.
    Post-auction, U.S. 7-year note yields were last down at
0.645%, from 0.648% on Monday.
    U.S. 30-year yields rose to 1.673% from Monday's
1.669%.
    On the front end of the curve, U.S. 2-year yields inched
lower to 0.128% from 0.133% on Monday.
    Breakeven rates on 10-year TIPS, which measure
expected annual inflation for the next 10 years, slipped to
1.963%, from Monday's 1.967%. 
    In the European bond market, benchmark German 10-year
government bond yields were flat at -0.573% in light
trading, while benchmark Italian 10-year bond yields slipped to
0.521%, from 0.522% on Monday.
    Volume is likely to remain thin in Europe this week, with
German stock markets already closed on Thursday and all markets
shut on Friday for New Year's day.
  
      December 29 Tuesday 3:18PM New York / 2018 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0963    -0.005
 Six-month bills               0.1          0.1014    -0.003
 Two-year note                 99-254/256   0.1289    -0.004
 Three-year note               99-222/256   0.17      -0.003
 Five-year note                99-252/256   0.3782    -0.002
 Seven-year note               99-220/256   0.6458    -0.002
 10-year note                  99-112/256   0.9347    0.002
 20-year bond                  98-108/256   1.4668    0.006
 30-year bond                  98-228/256   1.6723    0.003
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.75        -0.25    
 spread                                               
 U.S. 3-year dollar swap         7.75         0.00    
 spread                                               
 U.S. 5-year dollar swap         6.75        -1.25    
 spread                                               
 U.S. 10-year dollar swap        1.00         0.00    
 spread                                               
 U.S. 30-year dollar swap      -24.75         0.50    
 spread (Editing by Richard Chang)

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December 30, 2020 at 03:27AM
https://www.reuters.com/article/usa-bonds/treasuries-u-s-yields-little-changed-to-higher-focus-on-stimulus-checks-idUSL1N2J919Y

TREASURIES-U.S. yields little changed to higher; focus on stimulus checks - Reuters

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